Citi expect a 100 bps rate cut by FY '16

Buoyed by an improvement in India’s growth-inflation dynamics, Citi Research, said that it expects a cumulative 100 basis points of rate cuts by fiscal 2016.

“We believe that conditions conducive for easing are likely to arise in the coming months as base effect wears off, government efforts continue on food inflation and budget reinforces fiscal discipline. We expect a cumulative 100 basis points of cuts, taking the repo to 7 per cent by FY’16, maintaining a positive real rate of atleast 100 basis points over target inflation,” Citi said.

According to Citi, the normalisation of India’s macros have begun due to which interest rates and growth are likely to normalise. 

“Normalisation of India’s macro have begun. In 2013 it was CAD (down from 4.7 pc to 1.7 pc), in 2014 it is inflation– with more to go, and in 2015 we expect normalisation of interest rates and growth,” Citi said.