New Delhi [India], February 4 (ANI): The Reserve Bank of India (RBI) is expected to keep the policy repo rate unchanged and maintain a neutral stance in its forthcoming Monetary Policy Committee (MPC) review, according to a report by Nuvama Research.

The report stated that the central bank is likely to remain on hold after cumulative easing of 125 basis points from the peak, which has brought the policy repo rate down to 5.25 per cent. It added that the RBI is expected to continue with a "neutral" stance in the upcoming policy review.

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The RBI's MPC is scheduled to meet over three days on February 4, 5 and 6, with the policy outcome to be announced on Friday, February 6.

According to report, the transmission of past rate cuts to bank lending rates is still underway, while bond yields have remained relatively sticky. In view of this, the report said that the central bank is likely to focus more on liquidity management rather than further rate action at this stage.

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"In the forthcoming MPC review, we reckon the RBI shall maintain status quo after cumulative easing of 125bp, bringing the repo rate to 5.25 per cent. Transmission to bank lending rates is in progress and bond yields have been quite sticky," the report noted.

The report further highlighted that the recent trade deal between the US and India could help support foreign capital flows and the Indian rupee. This, in turn, provides the RBI with some leeway to manage domestic liquidity conditions more effectively.

On the macroeconomic front, the report observed that the Indian economy appears to be bottoming out, although the recovery has not yet become broad-based. It added that growth conditions remain uneven across sectors.

At the same time, the global environment continues to remain uncertain, with elevated levels of market volatility. Given these factors, the report said the RBI is likely to adopt a cautious, wait-and-watch approach in the near term.

"Accordingly, the RBI is likely to remain in a wait-and-watch mode," the report said, adding that policy decisions will continue to be guided by evolving domestic and global conditions.

Overall, the report suggested that while the rate easing cycle has already provided significant support, the RBI may now prefer to assess the impact of past actions and manage liquidity, rather than move towards immediate changes in policy rates. (ANI)

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