Comments on RBI Rate Cut by Mr. Kiran Kumar Kavikondala, Director & CEO, WealthRays Securities

Comments on RBI Rate Cut by Mr. Kiran Kumar Kavikondala, Director & CEO, WealthRays Securities:

Road to Economic Recovery - RBI may go for further easing…

Mr. Kiran Kumar Kavikondala, Director & CEO, WealthRays Securities

RBI gave a pleasant surprise as it cut repo rates by 25 basis points. The need for rate cut was largely anticipated and was advocated by government also. The cut comes when major economies are witnessing low inflation and deflation in some economies, along with this slowdown is also seen which translates to low inflation and low growth. Falling oil prices will sharply reduce India’s burden of CAD and control food inflation also. Rupee is seen strong against peers and this was perfect time to cut rates to spur growth.

Major companies that will benefit from this move are infra cos and automobile companies. Infrastructure is picking up and cost of funds are likely to come down. Automobiles which recently saw pull back of excise duty cuts extension may see growth in demand and profitability is seen rising on back of lowered cost of funds. November IIP data showed growth in capital goods while consumer durables showed negative growth. Banks may lower lending rates in near term which will boost consumption and manufacturing is expected to pick up.  This move is symbolic and post budget, given inflation trajectory is downward, RBI may go for further easing this year