Will it be 50 BPS this time-wait till Tuesday

Less than 48 hours to go before the crucial policy meet of Reserve Bank of India towards which the entire country is looking forward to eagerly. Individual investors, stock markets, lending firms to commoners, all eyes are right now on Raghuram Rajan, the Governor of country’s apex bank. Meanwhile, Indian bankers last week have slashed their marginal cost of funds lending rate and then there has been higher than anticipated fall in food prices as the government released data. The stock markets so far had been going by the assumption of a 25 basic points slash but looking at the present scenario and certain development during the last week of March stretched over the first two days of April, some believe there is a possibility of a higher rate cut by RBI. Will the markets move accordingly on Monday and Tuesday? Yes, there is a strong possibility, say market observers. All these while, banks, mainly the 27 PSU banks in India have been awaiting to know what other guidance will be coming from the RBI on handling the NPA mess—mention of which also may come handy on April 5 after the policy meet. So when we say all eyes are now on Tuesday’s crucial RBI meet, there are multiple reasons for saying so.

During 2015, RBI had slashed rates by 125 basis points and observers believe after a 25 basis points cut, the apex bank now may opt for a 50 basis points cut. Assuming a quick reaction from RBI, markets rallied higher immediate after union budget was tabled and touched new high but slowly it started discounting the possible 25 points cut and at this time, only a 50 basis points cut may take the markets either way, it is believed. Possibilities have become stronger after Janet Yellen’s dovish outlook on a future trajectory. While other central bankers in major countries this calendar year have remained dovish, it perhaps may lead RBI to stimulate Indian economy with lower rates. All said and done, this Sunday even as we gear up to witness happenings in the stock markets, lets get ready for a thunderous Tuesday. Guv, we wait anxiously.