View on RBI Monetary Policy (Jun 2021) by Churchil Bhatt, EVP & Debt Fund Manager, Kotak Mahindra Life Insurance Company

“The Monetary Policy Committee (MPC) has left the benchmark rates unchanged in its June 21 policy meeting, thereby prolonging its much needed support to the real economy. It has also decided to continue with its accommodative policy stance as long as necessary to revive growth on a durable basis. In light of the Covid 19 second wave, RBI has also revised down its GDP forecast to 9.5% for FY22, while its FY22 CPI forecast is at 5.1%. Risks to inflation remain balanced in RBI view. MPC is of the opinion that, in order to return to normalcy, economy needs continued support on all fiscal, monetary and sectoral front. MPC has also announced a host of targeted policy support measures to help sectors adversely affected by Covid second wave. On the bond market front, RBI re-emphasized its guidance on orderly evolution of Yield Curve with the announcement of INR 1.2 Trillion GSAP 2.0. We expect rates market to take comfort from continued RBI support. In light of the above, 10Y Benchmark Gsec should continue to trade in 5.90%-6.10% range in the near term.”

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