Source: Reserve Bank of India
The Reserve Bank of India today released the October 2020 issue of its monthly Bulletin. The Bulletin includes Monetary Policy Statement, 2020-21, Resolution of the Monetary Policy Committee (MPC) October 7-9, 2020, Monetary Policy Report – October 2020, one Speech, two Articles and Current Statistics.
The two articles are: I. GDP Growth Forecasts of the Reserve Bank of India – A Performance Assessment; and II. Demystifying Equity Prices using Dividend Discount Model: An Indian Context.
I. GDP Growth Forecasts of the Reserve Bank of India – A Performance Assessment
An assessment of forecast performance of key macro-economic variables is important for the formulation of forward-looking monetary policy by the central banks.
This article evaluates the growth projections of the Reserve Bank of India (RBI) against the final official estimates, which are available with a considerable lag.
II. Demystifying Equity Prices using Dividend Discount Model: An Indian Context
Financial variables provide useful information in assessing economic conditions and consequently serve as an important input for policy making. The movement of equity prices represents the interplay of different forces and hence there is a need to dissect these factors for effective policy making. This article uses dividend discount model (DDM) to estimate the implied equity risk premium (ERP) for Indian equities and attributes the changes in equity prices to factors including growth expectations, risk-free rate and ERP.
The application of DDM framework for Indian equity market yields average ERP estimates at 4.7 per cent for the study period (2005-2020).
Press Release: 2020-2021/471