RBI may cut key rates by 1 percentage point: JP Morgan AMC CEO

SAYS INDIA’S FII INFLOWS WILL CONTINUE EVEN IF THE US FEDERAL RESERVE RAISES INTEREST RATES THIS YEAR

MUMBAI: The Reserve Bank of India could cut key interest rates by up to 100 basis points (bps) over the next 12-18 months, helped by softening inflation, says Nandkumar Surti, MD and CEO of JP Morgan Asset Management Company (AMC).

“Inflation could substantially surprise on the downside… After around 50 bps rate cut, the RBI will likely take a gap of about three months. But, if the monsoon is good, there is a real possibility of rates easing even further. I won’t be surprised if we go close to 6.75% (repo rate). So, that would be another 100 bps in the next 12-18 months,” he told HT in an interaction.

In a surprise move, the RBI cut the repo rate by 25 bps in early January. It kept the rates on hold again in its monetary policy meeting earlier this month, but the market is expecting another rate cut after the budget.

With the expected rate cuts and the pickup in the overall economy seen over the next few years, Surti is bullish on the Indian markets.

He also said that even if the US Federal Reserve raises rates this year, investors will continue to pump in money into India’s equity and debt markets.

In 2014, the total Foreign Institutional Investors (FII) investment in India’s equity and debt markets stood at Rs 2.56 lakh crore. They have invested over `52,000 crore since the beginning of 2015.

In the equity markets alone, FIIs invested `97,000 crore last year.

Driven by the FII flows, the Bombay Stock Exchange sensex has surged 37% since the end of 2013.