RAJEEV MALIK
ECONOMIST, CLSA, SINGAPORE
The rate cut is bigger than expected, and the guidance is important that RBI is indicating that there is limit for further rate cut expectation, and I think they are pretty much done with further rate cuts this year.
SAUGATA BHATTACHARYA
ECONOMIST, AXIS BANK, MUMBAI
It is a positive signal despite the hawkish stance. Given the RBI’s rate action and its projection of economic indicators, I think they will cut the repo rate by a total of 100 basis points in fiscal 2012/13.
DEVENDRA PANT
DIRECTOR – PUBLIC FINANCE, FITCH RATINGS, NEW DELHI
It is apparent that the central bank’s main concern is more on the growth side rather than inflation, and this surprise cut is certainly in order to give a fillip or a boost to growth. But it is aggressive compared to what the market was expecting. The government has made it clear that growth should not slump below what level is at now, and there was a need to ease monetary policy. We are going to see bonds react positively and yields will fall, which will benefit pricing for the national borrowing and debt.
JAGANNADHAM THUNUGUNTLA
HEAD OF RESEARCH, SMC GLOBAL SECURITIES, NEW DELHI
The move is quite aggressive than what some market people were expecting. Now, we will have to see if the banks will pass on this cut as aggressively to industry. The central bank seems to be fairly comfortable with the liquidity situation, and is now shifting towards providing some stimulus to the economy.
RUPA REGE NITSURE
CHIEF ECONOMIST, BANK OF BARODA, MUMBAI
I think this is a very prudent policy, and this will definitely pressurise banks to revisit lending rates. RBI has front-loaded rate cuts. We will see banks lowering the borrowing costs either by adjusting spreads or by reducing BPLR (Benchmark Prime Lending Rates) and base rate. I am not seeing significant reduction in bond yields and the 10-year can be around 8.25%, because they also have hiked the limit on MSF (Marginal Standing Facility) and that will provide liquidity comfort.
RK GUPTA
MANAGING DIRECTOR, TAURUS MUTUAL FUND, NEW DELHI
I see it (the interest rate cut) as more of a sentiment booster … June-quarter results of companies will see some benefit. The rate cut should help interest rate-sensitive sectors like autos and real estate.
DARIUSZ KOWALCZYK
SENIOR ECONOMIST AND STRATEGIST, CREDIT AGRICOLE CIB, HONG KONG
The reduction was bigger than expected and shows a strong shift of focus towards supporting growth, whose stabilisation was described as a goal of the easing. The RBI said that rate cut room is limited, and we see at least 25 bps more this year.
NIRAV DALAL
PRESIDENT & MD, DEBT CAPITAL MARKETS, YES BANK, MUMBAI
It is a little bit of a surprise. When you look at it objectively, 25 basis points would have been a token. I think rate cut expectation will remain very, very contained and a lot will depend on growth and inflation numbers. Based on the current and evolving environment, to expect significant rate cuts in the remaining year might not be possible. I would expect the 10-year yield to stabilise somewhere in 8.25-8.50% range in the near term.
JONATHAN CAVENAGH
FX STRATEGIST, WESTPAC, SINGAPORE
RBI decision ? more than expected, market was looking for 25 bps cut. INR has rallied initially (due to greater support to growth from RBI, Indian equities have gone bid) but the comment that further room to cut rates is limited may limit INR gains. Yesterday we had an upside surprise on inflation data and positive revisions to previous months, which will be very much at the forefront of RBI thinking in terms of determining how far they should cut rates.
