Street Expects a Rate Cut of At Least 25 bps
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*