By
Mirza Baig
04-02-2020
India: Trading The L-Shaped Recovery
(2 min read)
We update our views on India ahead of Thursday’s MPC meeting. After the RBI’s surprisingly hawkish MPC meeting on 5 December, when the policy rate was left unchanged at 5.15% following five successive rate cuts totalling 135bps, my modal scenario was as follows:
“RBI will focus on improved policy transmission (OMOs, twist, etc.) but stop short of direct intervention in credit markets. Growth expectations would continue to deteriorate. RBI would resume cutting rates in 2020. INR would continue depreciating; bonds would be volatile in the near-term with a misplaced focus on onion prices but rally next year for the wrong reasons (lack of growth).”
The above template remains pertinent ahead of Thursday’s meeting. Specifically:
“RBI will focus on improved policy transmission (OMOs, twist, etc.) but stop short of direct intervention in credit markets. Growth expectations would continue to deteriorate. RBI would resume cutting rates in 2020. INR would continue depreciating; bonds would be volatile in the near-term with a misplaced focus on onion prices but rally next year for the wrong reasons (lack of growth).”
The above template remains pertinent ahead of Thursday’s meeting. Specifically:
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