Expect 25-50 bps rate cut post Budget: experts

Says RBI will act after reviewing govt's Budget

The Reserve Bank of India held interest rates steady at 7.75% on Tuesday after easing monetary policy just three weeks ago, leaving its next move probably until after the government presents its annual budget at the end of this month.

Instead, the RBI cut the statutory liquidity ratio (SLR) - or the amount of bonds that lenders must set aside - by 50 basis points to 21.5% of deposits from the two-week cycle starting on Feb 7 in a bid to spur banks to inject more credit into the economy.

Expert comments:

R. SIVAKUMAR, HEAD OF FIXED INCOME, AXIS ASSET MANAGEMENT

"The rate action is more or less expected. We have also been expecting there will be some movement on SLR over a period of time.

"The interesting bit will be rule changes on Foreign Institutional Investors, which would have some impact on the corporate bond market. We continue to expect the RBI to cut another 50-75 basis points in this calendar year, and the current statement is fairly in line with its recent guidance."

SHAKTI SATAPATHY, FIXED INCOME STRATEGIST, AK CAPITAL, MUMBAI

"Today's move seems more practical and the future course of action would largely depend on how effectively the government is maintaining its fiscal deficit in the upcoming union budget.

"Though international crude prices have shown some volatility in recent days, we believe oil prices to remain favourable at least till the first half of coming fiscal year.

"Assuming the current economic scenario and a clarity over the fiscal consolidation plan, we believe the RBI to come up with one more 25 basis points rate cut any time between mid-March and next policy date of April 7, 2015."

RADHIKA RAO, ECONOMIST, DBS, SINGAPORE

"The tone of the accompanying statements was dovish, but cautious, highlighting two aspects a) fiscal slippage ... b) an acknowledgement of the shift in global dynamics and undercurrents of a renewed push to depreciate currencies.

"This also reflects the RBI's disdain with quantitative easing programs (as ECB joined the bandwagon, just as the US Fed bowed out) and the associated risks to financial stability and asset markets.

"We maintain our call for another 50 basis points cuts by the June quarter after the FY16 budget contents are sieved through."

DEVEN CHOKSEY, MANAGING DIRECTOR, KR CHOKSEY SECURITIES

"I think the policy was more in line with the expectations. The 50 basis points cut in SLR is symbolic, but I think it is a positive move. This will provide additional liquidity for banks and will help banks to increase lending.

"We do expect the RBI will reduce the rates sooner, which will fuel growth in core sectors like infrastructure and manufacturing."

SANDEEP NANDA, CHIEF INVESTMENT OFFICER, BHARTI AXA LIFE INSURANCE, MUMBAI:

"By and large the policy has been on expected lines. Nobody was expecting a rate cut. The RBI wants to take a look at the government's numbers in the budget before thinking further. If current trends in commodity prices and India's fiscal deficit prevail, then one can expect another round of easing after the federal budget."