Street Ex­pects a Rate Cut of At Least 25 bps

The Economic Times - - Diruption: -

Most re­spon­dents in ET poll feel Ra­jan will go for only a quar­ter per­cent­age point cut in bench­mark rate as the cen­tral bank may want to get a sense of how nor­mal the mon­soon will be

“RBI’s as­sess­ment of the fis­cal outlook post the Bud­get would be the crit­i­cal fac­tor be­hind that. Any change in the liq­uid­ity man­age­ment frame­work would also be keenly watched.”

The repo rate, at which banks bor­row short-term funds from RBI, is now at 6.75%.

In the Fe­bru­ary 29 Bud­get, finance min­is­ter Arun Jait­ley scotched mar­ket spec­u­la­tion about miss­ing the fis­cal deficit tar­get by pledg­ing to stick to it — 3.5% of In­dia’s gross do­mes­tic prod­uct and 3% in the next two years.

That cheered the mar­kets, re­viv- ing rate cut hopes with fall­ing bond yields push­ing prices up. The cen­tral bank has re­duced the pol­icy rate by a cu­mu­la­tive 125 ba­sis points since Jan­uary last year. The last rate ac­tion was on Septem­ber 29 — a more-than-ex­pected half per­cent­age point cut.

“We ex­pect the RBI to con­tinue with its ac­com­moda­tive com­men­tary, al­beit mod­er­at­ing the tone grad­u­ally over the year as it starts re­mind­ing the mar­ket of its ar­du­ous 4% (by early 2018) in­fla­tion tar­get,” HSBC said in a re­port.

From Tues­day’s pol­icy meet (in ba­sis points) Axis Bank Citi Bank Bank of Amer­ica DBS Bank Yes Bank Ko­tak Mu­tual Fund IDFC Mu­tual Fund HSBC Birla Sun Life MF DCB Bank HDFC Life In­surance In­dia Rat­ings Deriv­ium Tra­di­tion Se­cu­ri­ties Edel­weiss Fin Cen­trum Broking Moti­lal Oswal SBI SBI DFHI Pri­mary Deal­er­ship*

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