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Synopsis
On the face of it, the RBI’s job is to decide on monetary policy. But the fact is that, as a banking regulator, it has the ability to direct resources to areas it feels require attention. What it did on Wednesday will have far-reaching effects on the economy – which is why the stock market reacted the way it did. The fact that banks have been allowed to finance M&As suggests a confidence that the Indian banking system has reached a stage where it can handle the risk of backing an entrepreneur’s assumptions about a merger or an acquisition. The grounds are probably being laid for a much more confident India.
The way the stock market reacted to the RBI’s announcements on Wednesday might have surprised some. It is not every day that the central bank does what it did on that day. It is probably after decades the RBI has announced measures that will likely have such a far-reaching impact – more than what can be imagined today. And yes, for the stock market. The only thing the bulls now need to go on a rampage is the inking of the India-US tariff deal.
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