Barclays Capital now expects another 75 bps of rate cuts over the rest of 2013 versus its previous call of 25 bps in easing due to slowing inflation and weakening economic growth.
BarCap says in a note it sticks to its call the RBI will cut interest rates by 25 bps in June, but expects 50 bps in additional cuts over the rest of 2013.
The investment bank also marginally lowers its current fiscal year GDP forecast to 6 percent from 6.2 percent to reflect recent disappointment in economic activity.
Further rate cuts and lower inflation are likely to encourage portfolio inflows to Indian assets and support the rupee in the near term, says the note, forecasting USD/INR to fall to 53.50 in the coming months.
BarCap also stays bullish on India government bonds.