RBI to stay balanced in managing inflation and facing global pressure: Kotak
Kotak Institutional Equities forecasts a more balanced approach by the Reserve Bank of India (RBI) in managing the inflation amid challenges posed by global financial markets and various macro factors at play.
Developed market central banks are likely to be cautious about the rate hike cycles with visible signs of stress in the financial sector that could lead to a secular stagnation if extended.
While the RBI has taken a hawkish stance and expressed concerns about core inflation in its recent policy, Kotak Institutional Equities believes that a premature pause could confuse inflation pressures and financial sector risks.
The brokerage firm anticipates a 25-bps hike in the upcoming policy, followed by a CRR cut of 50 bps in mid-FY2024 to ease liquidity.
In FY2024, India's inflation is unlikely to revert to close to 4 percent on a durable basis, and the country's growth trajectory may be uncertain due to increasing macro risks in the global economy and ongoing financial sector dislocations.
Despite this, Kotak Institutional Equities predicts that India's GDP growth in FY2024 will be 5.6 percent, factoring in a potential global economic slowdown.