Jaya Rao Venkatesan, a fund manager at Sundaram Mutual Fund, which manages about $3.2 billion in assets, comments on India's monetary policy and stock markets. He spoke by phone today.
India's central bank increased the benchmark interest rate to a two-year high and signaled further gains in borrowing costs after raising its inflation forecast. Governor Duvvuri Subbarao lifted the repurchase rate to 6.5 percent from 6.25 percent, according to a statement from the Reserve Bank of India in Mumbai today. The decision was forecast by 21 of 22 economists in a Bloomberg News survey. One expected a half-point advance.
The Bombay Stock Exchange's Sensitive Index, or Sensex, gained 0.2 percent to 19,189.25 at 12:21 p.m. in Mumbai.
On the rates decision:
"There was a lurking fear that rates could rise more. The increase is in line with expectations and to that extent the policy is positive for the markets."
On the monetary policy:
"The central bank is trying to anchor inflation expectations but at the same time doesn't want to disturb the growth dynamics. So, as of now, they are able to keep the fine balance between growth and inflation."
On the outlook for stocks:
"I don't think there is big positive or negative fallout from the policy for the markets.
"We continue to see short-term headwinds in terms of inflation, but the medium-term outlook for India remains unchanged.
"A rise in crude oil prices beyond $100 per barrel could severely impact the growth of the Indian economy."
Venkatesan said the policy decision won't change his investment strategy and he continues to favor consumption, healthcare and software stocks.
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'I made my money by selling too soon.'
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