Banking Sector Update; Mid-Quarter Monetary Policy Review; ::Emkay

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Banking Sector Update; Mid-Quarter Monetary Policy Review;

n    RBI hikes the Repo rate by 25bps to 7.50% and accordingly the reverse repo stand adjusted at 6.5% and MSF (Marginal Standing Facility) at 8.5%

n    Inflation remains a key concern and will continue to be the driving factor in formulating monetary policy

n    The tone of the RBI was very hawkish, given higher inflation particularly core inflation, which increased from 6.3% in April to 7.3% in May’ 11, much above its medium-term trend of 4% 

n    As RBI continue with its anti inflationary stance we expect another 50-75bps increase in policy rate (with upward bias) over rest of FY12, though in a calibrated manner.