RBI's addl cash reserve requirement on incremental Bank deposits

Mumbai Aug 10 RBI has imposed additional cash reserve requirement on incremental bank deposits.

Sandeep Bagla CEO Trust Mutual Funds says, "It is a cautious wait and watch policy, with macros having turned negative since last announcement in June."

Oil prices, food prices have all gone up. Inflation expectations have gone up as well. RBI has imposed additional cash reserve requirement on incremental bank deposits. In July CPI headline reading will go up to close to 6.50%, he said.

Next few months would be a good opportunity to add duration to the portfolio with a 12 month investment horizon. It would be difficult for risky assets to perform in face of the headwinds caused by tight monetary and financial conditions.

Radhavi Desphande, President & Chief Investment Officer, Kotak Mahindra Life Insurance Company said, "After rightly guiding the markets in the previous policy, MPC stays rates on hold for the third time in row. MPC continues to highlight Global economy challenges including high levels of debt while it takes comfort from the domestic stable core inflation and normalising supply pressures to keep monetary policy framework unchanged. "

MPC‘s inflation target rate at 4% keeps getting a mention, with introduction of innovative instruments to keep liquidity around adequate levels will keep markets watchful on further moves. A mention of high current food inflation as transitory and considering a balanced demand-supply for bonds, comfortable fiscal and stable current account, we continue to expect a longish pause as our base case and bonds to stay rangebound with yield curve steepening bias to stay, she said.