India's Central Bank will meet on April 17, 2012 to review its Monetary Policy. Though mostly are expected a rate cut this time after three years, but still there are different views from experts:
Dr. Arun Singh, Sr. Economist, D&B India:
Despite subdued industrial production, the RBI is unlikely to cut the repo rate until Jun 2012 due to the prevailing upside risks for headline inflation. Notwithstanding the moderation in the inflation for food articles, high inflationary pressures exist in the economy owing to the rise in international crude oil prices and the incomplete pass-through of the global oil prices, hike in excise duty and services tax and the rupee depreciation.
Nomura India:
Weak IP data, along with lower core inflation should cement the case for a rate cut as the cost of not cutting rates is rising. We expect a 25bp repo-rate cut and no change in the cash reserve ratio on April 17.
Macquarie Securities:
The RBI is walking a tightrope and has to find a balance between slowing domestic growth and upside risks to inflation. We expect the RBI to lower policy rates by 50-75bp in 2012. We think most of the cuts will be front loaded, with the first policy rate cut beginning from the April 17, monetary policy meeting. Indeed, we expect banks to begin cutting lending rates selectively post the expected policy rate cut in April. However, considering the tight inter-bank liquidity, we think retail deposit rates will be sticky and will respond only with a lag to cuts in lending rates.
Sudhakar Shanbhag, CIO, Kotak Mahindra Old Mutual Life Insurance:
The market expectation of rate cut from the RBI has increased post this data release and bond yields and equity markets are reflecting the expectation. Global dynamics especially Oil prices are critical and RBI would also get to see the inflation release on April 16, 2012 before it takes a stand on rate cuts.
Moses Harding:
One thing is certain, it will not be status-quo; there will be delivery of rate cut or CRR cut or combination of both. It is very difficult to choose one from these three options. It is considered prudent to cut policy rates having lowered CRR by 125 bps in quick time. We would put a weight of 51% for 25-50 bps rate cut (without CRR cut) and 49% weight on 25 bps cut each on policy rates and CRR. It would be a pleasant surprise if RBI delivers 75 bps CRR cut to provide one-shot 1% downward shift in operative policy rate. Having said these, it is very critical to shift the system liquidity into surplus mode soon to address growth concerns and to create demand for Government Bonds to cut cost of Government borrowing.
Aditya Birla Money:
The bond yields have corrected sharply (30bps) in the last few sessions indicating that the market is building case for a 25bps cut in the repo rate. The liquidity also as expected has come down to ~800 billion from an average of 1,500 billion in March 2012. On the fiscal side, the Government is unable to raise fuel prices till date, which demonstrates the inability of the Government to move on the critical policy measures. Markets are expected to be range bound with individual stock under-performance/out-performance.
(source: myiris)
