Traders Expecting Rate Cut as done deal

  • Record low inflation has boosted the expectation for the RBI to cut rate and market seems to price in the 25 basis point cut as of now and further a small probability of another reduction down the line. However certain Market Punters also believe in a 50 basis points cut as well.
  • The current CPI index is quite lower as against the Govt’s target. This is not healthy news keeping in view this is a clear signal of slowing business cycles of production and consumption!!
  • Other impacts that might lead to rate cut are:

    • Overseas funds inflows could get slow as it will squeeze the spread between India and US treasuries.
    • 10-year sovereign bond yield shall slide down further to 6.30% level leading to better Valuations on existing Bonds/debt related funds/investments.
    • Increase in demand for Housing, auto, consumer durables, steel, iron and other capital goods would lead to certain stocks surging further.