Reserve Bank of India (RBI) policy in February
Global economic growth
How are the Indian and global economic environments affecting the financial markets?
The consumer price index (CPI) inflation on a year-on-year basis is low at 2.19 percent in December 2018, far less than what the RBI has to worry about, closer to the lower end of the RBI inflation targeting range of 2-6 percent raising the possibility that the RBI could return its stance to neutral at the February 07, 2019 meeting of the monetary policy committee (MPC) and perhaps could lower the repo rate later in 2019, giving a boost to the financial markets. The Indian financial markets – other than reacting to developments abroad – can be expected to continue to depend on corporate fundamentals given that the macro situation is stable for now.
China’s growth slowdown to around 6.5 percent appears to be more on a permanent basis and this could benefit India, particularly, amidst US trade war with China, if “Make in India” picks up. The International Monetary Fund (IMF) has warned of slowdown of global growth in 2019 and 2020 and this has pressured the global financial markets. The affect of global growth on India and local financial markets will depend on the extent to which it will affect India’s exports and the stock prices of export-oriented companies.
What to expect from the markets next week?
Continued range-bound and flat behavior can be expected in the coming week. It must be noted that corporate earnings reports will continue to determine whether the major Indian indices will recover from being close to correction territory.