The RBI’s macroeconomic review released yesterday has
unleashed a debate over how much the Governor will tighten today.
In our view, the debate over 25bps vs 50bps is futile.
The concoction of 10yr yields 8.25-8.50%, WPI inflation
6.5-7%, CPI inflation at 8-9%; at a time when GDP growth below 5% is
intoxicating enough to stop any major advances in the economy. It would not
matter much even if Rajan maintains status quo today, or cuts MSF 25-50bps
without touching the rates.
Prima facie it appears that RBI is fuelling fears of larger
rate hike to deliver 25bps hike and still make the markets happy. Welcome Fed
style policy making to RBI.
Syndicate Bank yesterday highlighted what to expect from
most PSUs on asset quality in coming days.
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