The Hindu Business Line : Market View

The key take-out from the Annual Monetary Policy has been a subtle change in the tone from hawkish to cautious compared the recent quarterly review of the policy. The various statements indicate a shift back towards focusing on growth momentum and defending the export competitiveness of the currency. Essentially the central bank is looking to sustain growth momentum at higher levels, while ensuring stability in inflation and asset prices. While interest rates have been left unchanged, one needs to keep in mind that further direction would depend on the macro economic developments, especially on the inflation, credit and liquidity fronts. The projections made on the money supply and credit growth fronts indicates that the RBI is factoring higher growth rates. If there are no adverse global developments and oil prices remain stable, we could see 10-year yields start to move down from current levels. Corporate spreads are currently very high and investments at these levels could provide attractive returns.

Franklin Templeton Investments

Apart from price stability and managing inflationary expectations, the thrust of the policy this time was also on further development of the financial markets as well as taking steps towards full capital account convertibility. RBI is keen to encourage the outbound dollars since its kitty above $203 billion. The RBI clearly remains hawkish, though to a lesser extent and will not hesitate to raise the rates, if the lag effects of its past actions don't show up on the real economy variables. The economic growth target was lowered to 8.5 per cent, in line with lower credit off take figures.

Quantum Mutual

Benign inflation, which has allowed central banks in most countries to maintain low real interest rates, has given the current global economic cycle its legs. To be sure, there are enough central banks out there raising interest rates but they are all doing so at a very measured pace; their objective is to normalise low short-term interest rates rather than squeeze economic growth to contain inflation. India is a bit of an oddball in this regard with inflation gaining precedence as a central issue. It is for the first time in recent history that India's inflation rate is running above the average level in developing countries. However, in a globalised world, it's difficult to imagine that India's inflation profile will get too out of sync with the rest of the world to precipitate a local bear market. More likely, global inflation trends and interest rate movements will still play a dominant role in setting the local market's direction. The odds then favour a continuation of the broad bull market even as some parts of the financial complex, from small caps last year to real estate plays this year, keep imploding.

Morgan Stanley Growth Fund

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