The unchanged repo rate is a festive bonanza for homebuyers and gives them yet another opportunity to make cost-optimized home purchases. If we consider the present trends, the overall consumer market looks bullish across sectors, particularly the automobile and housing markets, which in many ways reflect the health of the economy. We are entering the festive quarter with a very strong momentum in housing sales, and unchanged interest rates will act as a major catalyst for growth in the residential market.
As per ANAROCK Research, housing sales across the top 7 cities created a new peak in Q3 2023 (despite the usually slow monsoon quarter) and stood at 1,20,280 units as against over 88,230 units sold in Q3 2022, thus recording 36% yearly growth. Thanks to the unchanged repo rate and the resultantly stable home loan interest rates, we can expect the momentum to continue.
In the monetary policy announced by RBI today, some key developments are mentioned below:
- RBI’s policy came out on expected lines with both stance and rates being kept on hold.
- Repo rate kept unchanged at 6.5%.
- Stance on ‘withdrawal of accommodation’ maintained.
- RBI has kept headline CPI projection for FY24 unchanged at 5.4%.
- GDP forecast for FY24 retained at 6.5%. RBI remains bullish on growth.
- This policy again reiterated the 4% target band as inflation and highlighted on being vigilant towards the same.
- Spillover from global food and energy price shock remain key upside risks to inflation apart from domestic price shock from lower sowing.
- Governor’s statement also signaled some tightening liquidity conditions going forward.
- Option of OMO sales have also been kept open.
- The 10Y yield reacted to the same by inching up to 7.34% compared to its yesterday’s close of 7.22%.
- The Governor mentioned that distribution of liquidity in the banking system has remained skewed.
- It is also pointed out that it is desirable for banks to explore lending opportunities in the inter-bank call market rather than passively parking funds in the SDF at relatively less attractive rates.
- Overall we retain our forecast of 5.5% for CPI in FY24, with some upside risk of ~0.15-0.25% from the ongoing festive demand, World Cup event and volatility in oil prices.
- Real GDP growth in FY24, is also retained at 6.3%, with current high frequency indicators holding up in a pretty balanced manner.
- We expect no rate action in FY24, as of now.
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