Mumbai – A majority of India Inc have little expectations of an interest rate cut from the reserve Bank of India’s (RBI) second quarter monetary policy review on October 30 given the macro-fundamentals of the economy, with 53 percent not for seeing any reduction in the policy rate, says a survey.
However, the RBS in a pre-policy client survey released here today, observed the market is gearing towards a softening in the interest rates in the long-term, say beginning March.
The Reserve Bank will unveil its busy season credit policy next Tuesday, where it is widely expected that Governor Subbarao will leave all the key rates unchanged due to the persistently high inflation, which in August stood at 7.81 percent.
Many analysts and economists are also saying that it is too early for the government to expect anything dramatic on the interest rate regime despite the recent reform measures.
But there is also a section in the industry and academia who call for some reciprocal measures from the Mint Road, at least symbolically which can go a long way in boosting the sentiment.
Currently, CRR is pegged at 4.50 percent, while repo is tied at 8 percent, after the tweaking in the March-April period.
While half (50.9 percent) the respondents don’t expect any change in the CRR, around 49 percent are looking at a 25-50 bps cut in the same on next Tuesday.
Significantly, around 53 percent of the respondents expect no cut in the repo or the short-term lending rates, while the rest expect a 25 bps cut, RBS said in the survey.
The 14th RBS clients survey covered over 120 local market participants, including its corporate clients, banks, insurance companies and mutual funds among others.
As much as 56 percent of the responses came from its corporate clientele and rest from financial institutions.
The market is split down the middle on whether the easing cycle begins with this policy or not with only half of it feel the easing cycle will begin in the long-term say by June next.
Around 51 percent believe there will be a rate pause in CRR this policy review meeting, RBS said in the release.
On the rupee, the survey says median expectation is the local unit trending up to 52 to the dollar by March.
The market is expecting the rupee to remain range bound in the near-term, while continuing to be moderately bullish in the longer-term. Agencies
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