India liquidity and rates strategy update

In a surprise move, RBI cut repo rates by 50bp while market consensus was inclined for a 25bp cut only. In response, OIS and bond yields fell as market digested the implications of a larger than expected cut. The policy language was rather hawkish, and played up upside inflation risks and said that scope for future rate cuts would be limited. 

We see liquidity deficit increasing to INR1.2trillion in June from INR800bn currently, and highlight that RBI is likely to announce OMOs in June to bring back the deficit closer to current levels.For details, see the table in the attachment.

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Thanks and Regards 
 
Rohit Saxena

Phone No: 09899365905
Mail Id: simmi9sep@gmail.com

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