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RBI to hold rates on inflation concerns, fiscal boost likely: Poll

Rising inflation is expected to keep the Reserve Bank of India from cutting rates again until late this year, while an expansionary federal budget due next month attempts to put a floor under rapidly-slowing growth, a Reuters poll found.

Last month a rate cut at the Feb. 4-6 meeting was a close call but with the latest inflation print showing a sharp increase – accelerating to its highest in more than five years and above the upper band of the RBI’s target range – the central bank will be forced to stay on the sidelines.

That is despite the Indian economy expanding at its weakest pace in over six years in the July-September quarter and the Jan. 17-22 poll of nearly 65 economists showing a sharp cut to the growth outlook for this fiscal year.

“Our expectation is that there might be higher inflation prints at least until April beyond which you could see some moderation,” said Sakshi Gupta, senior India economist at HDFC Bank.

“Given this trajectory, it would reach a stage where inflation prints are going to become more comfortable for the RBI, we expect them to seize that opportunity and cut to support growth.”

Still, in response to additional questions, all 42 economists said growth would gradually pick up in the next six months and a majority said inflation would moderate.

“A sharp pullback in credit caused growth to slow dramatically in 2019. But fiscal and monetary policy have been loosened, this should lead to a gradual recovery in investment and household spending,” said Shilan Shah, senior India economist at Capital Economics.

While the RBI was the most aggressively dovish major central bank in Asia, slashing rates by a cumulative 135 basis points last year, it paused unexpectedly in December on inflation concerns.

The latest poll projected the central bank to extend that pause – keeping its repo rate on hold at 5.15% at its February meeting and until at least October. Reuters

Sensex rises over 250 pts; L&T, Axis Bank rally 3%

Market benchmark Sensex rose over 250 points on Thursday tracking gains in L&T, Axis Bank and Infosys, despite massive selloff in global equities.

The 30-share BSE index was trading 233.92 points or 0.57 per cent higher at 41,349.30. Similarly, the broader NSE was trading 60.80 points, or 0.50 per cent, up at 12,167.70.

Larsen & Toubro (L&T) and Axis Bank were the top gainers in the Sensex pack, rising up to 2.77 per cent, after the companies posted positive quarterly numbers.

After market hours on Wednesday, L&T reported a 15 per cent rise in its consolidated net profit at Rs 2,560.32 crore for quarter to December 2019.

Likewise, Axis Bank posted a 4.5 per cent year-on-year jump in net profit at Rs 1,757 crore for the third quarter ended December 2019 amid improving asset quality.

Shares of Infosys jumped 1.44 per cent after the government said it was working with the managed service provider for the goods and services tax (GST) regime, to improve the performance of GSTN filing portal on a permanent basis.

On the other hand, HUL, Nestle, Asian Paints and Tech Mahindra was trading in the red.

According to traders, despite selloff in other Asian equities amid fears of contagion after a deadly new virus emerged from China, stock-specific action kept domestic benchmarks buoyed.

Bourses in Shanghai, Hong Kong, Tokyo and Seoul were trading significantly lower.

Brent crude oil futures dropped 1.33 per cent to USD 62.37 per barrel.

Meanwhile, the rupee depreciated marginally to 71.21 against the US dollar in morning session.

In the previous session, Sensex settled 208.43 points, or 0.50 per cent, lower at 41,115.38; while the Nifty closed 62.95 points, or 0.52 per cent, lower at 12,106.90.

Meanwhile, on a net basis, foreign institutional investors sold equities worth Rs 176.43 crore, while domestic institutional investors offloaded shares worth Rs 326.22 crore on Wednesday, data available with stock exchanges showed. PTI

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