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FUND VIEW - Fund managers comment on RBI's policy

MUMBAI (Reuters) – The Reserve Bank of India (RBI) left key rates unchanged at its first-quarter policy review on Tuesday. The bank said it expects the economy to grow 6 percent this fiscal and inflation at 5 percent by end-March 2010.

A bank employee counts bundles of currency at a cash counter in Agartala, Tripura in this July 7, 2009 file photo. REUTERS/Jayanta Dey/Files

The Reserve Bank of India also said it will maintain the accommodative stance of monetary policy until robust signs of recovery are visible, adding that its exit strategy will be modulated in line with macro-conomic developments.

Following are comments from fund managers on the policy review:

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RAMANATHAN K, HEAD-FIXED INCOME, ING INVESTMENT MANAGEMENT:

“The status quo on key rates were in line with expectations. The policy maintains a balance between the nascent recovery and the need to nurture the recovery and the necessity to moderate the accommodative stance when inflationary trends emerge.

“The RBI has also upped the inflation expectation to 5 per cent from 4 per cent by March 2010, again something which was expected by the market. With no surprises in the policy we expect the market to shift focus to the government borrowing program.

“With front loading of the borrowing program, the supply is expected to reduce as we go along which would be positive for the markets in the short term. However with growth picking up and inflation rearing its head towards the end of the year we expect yields to head higher in the medium term.”

LAKSHMI IYER, HEAD-FIXED INCOME, KOTAK MAHINDRA MUTUAL FUND:

“Accomodation in stance to continue for now but not for eternity as macro economic situation may warrant change in stance in future.

“Shorter end of the curve to remain supported. Longer end to trade range bound in response to OMO purchase and auction supplies.”

MAHHENDRA JAJOO, HEAD-FIXED INCOME, TATA ASSET MANAGEMENT:

“It’s pretty much in line with expectations. People were expecting rates not to change and RBI to reassure about the credit policy till economic growth pick-up happenes.

“I don’t think there is any significant move in the bonds. There is no extra demand or sell-offs.”

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