Reduction bigger than expected: experts

Yesterday there was an upside surprise on inflation data

Following are some experts commenting on the credit policy announcement where the RBI has reduced the repo rate by 50 basis point.

Dariusz Kowalczk, Senior consiltant and Strategist, credit Agricole CIB, Hong Kong:-

"The reduction was bigger than expected and shows a strong shift of focus towards supporting growth, whose stabilization was described as a goal of the easing. "The RBI said that rate cut room is limited, and we see at least 25 bps more this year."

Nirav Dalal, President and Managing Director, Debt capital markets, Yes Bank, Mumbai

"It is a little bit of a surprise. When you look at it objectively, 25 basis points would have been a token. I think rate cut expectation will remain very, very contained and a lot will depend on growth and inflation numbers. Based on the current and evolving environment, to expect significant rate cuts in the remaining year might not be possible.

"I would expect the 10-year yield to stabilise somewhere in 8.25-8.50% range in the near term."

Jonathan Cavenagh, FX Strategist, Westpac, Singapore

"RBI decision - more than expected, market was looking for 25 bps cut. INR has rallied initially (due to greater support to growth from RBI, Indian equities have gone bid) but the comment that further room to cut rates is limited may limit INR gains.

"Yesterday we had an upside surprise on inflation data and positive revisions to previous months, which will be very much at the forefront of RBI thinking in terms of determining how far they should cut rates."