Macro risks in G-sec market overdone; Moody's upgrade the right move: BofA

BofA-ML expects RB to cut rate on December 6 to signal a bank lending rate cut before the busy industrial season intensifies, as inflation remains within the central bank's 2-6% target

Bank of America Merrill Lynch firmly believes that macro risks are overdone in the G-sec market. Moody's upgrade of Indian sovereign rating to Baa2 from Baa3 endorses our view. We continue to expect the Reserve Bank of India Monetary Policy Committee (RBI MPC) to cut the repo rate on December 6 to signal a bank lending rate cut before the 'busy' industrial season intensifies, as inflation remains well within the RBI's 2-6 per cent target, even after the temporary onion/tomato price spike.

Even if we go wrong, we think concerns of an RBI hike are surely exaggerated. Second, we continue