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INDIA: Country Wrap: RBI Cuts Rates for First Time Since 2020.

INDIA
IndiaEM BulletBulletAPACEmerging Market News
  • In his first monetary policy meeting as Governor, Sanjay Malhotra delivered India’s first rate cut since 2020 in an attempt to arrest the slowing growth.  The six member panel voted unanimously to cut rates 25bps to 6.25%, a move that the majority of economists predicted.  The monetary stance has remained at neutral, consistent with our view that the rate cutting cycle in India will be shallow.  With inflation still above the RBI target of 4%, its trajectory has been slowing, providing the window to cut in today’s meeting. (source: MNI – Market News).
  • India’s NIFTY 50 has hardly reacted to the rate cut, rising just +0.07% in early trading, yet remains on track to finish over +0.60% higher for the week.
  • INR: the rupee gained as it became clearer that a rate cutting cycle would be shallow.   The rupee was +0.12% better at 87.47 but remains almost 1% worse for the week.
  • Bonds: Indian government bonds are weak post today’s rate cut indicating traders were expecting more from the RBI.  India’s 10YR government bond is higher in yield by +4bps to 6.697% in early trading.  The RBI voted to keep its stance at neutral, consistent with MNI’s view, disappointing traders who expected a more accommodative approach from the new Governor. 
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  • In his first monetary policy meeting as Governor, Sanjay Malhotra delivered India’s first rate cut since 2020 in an attempt to arrest the slowing growth.  The six member panel voted unanimously to cut rates 25bps to 6.25%, a move that the majority of economists predicted.  The monetary stance has remained at neutral, consistent with our view that the rate cutting cycle in India will be shallow.  With inflation still above the RBI target of 4%, its trajectory has been slowing, providing the window to cut in today’s meeting. (source: MNI – Market News).
  • India’s NIFTY 50 has hardly reacted to the rate cut, rising just +0.07% in early trading, yet remains on track to finish over +0.60% higher for the week.
  • INR: the rupee gained as it became clearer that a rate cutting cycle would be shallow.   The rupee was +0.12% better at 87.47 but remains almost 1% worse for the week.
  • Bonds: Indian government bonds are weak post today’s rate cut indicating traders were expecting more from the RBI.  India’s 10YR government bond is higher in yield by +4bps to 6.697% in early trading.  The RBI voted to keep its stance at neutral, consistent with MNI’s view, disappointing traders who expected a more accommodative approach from the new Governor.