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This article is more than 2 year old.

Brokerages expect RBI to cut interest rates by 25 bps in June MPC meeting

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India’s gross domestic product (GDP) growth rate in the January-March quarter of 2018-19 slowed to 5.8 percent.

Brokerages expect RBI to cut interest rates by 25 bps in June MPC meeting
Brokerages on Monday said they expect the Reserve Bank of India (RBI) will cut interest rates by 25 basis points in the June monetary policy committee (MPC) meeting after India’s fourth-quarter gross domestic product (GDP) growth rate slowed to a five-year low of 5.8 percent.
One basis point is a hundredth of a percentage point.
India’s gross domestic product (GDP) growth rate in the January-March quarter of 2018-19 slowed to 5.8 percent, due to poor performance in the agriculture and manufacturing sectors, as per the data released by the government on Friday.
According to the Central Statistics Office (CSO), GDP growth during 2018-19 fiscal stood at 6.8 percent, lower than 7.2 percent in the previous financial year.
The growth in the gross domestic product (GDP) was slowest since 2014-15. The previous low was 6.4 percent in 2013-14. The fourth quarter growth was below China's 6.4 percent. The economy grew 6.6 percent in the third quarter, 7.1 percent in the second quarter and 8.2 percent in the first quarter of FY19.
Here's a list of brokerage views on Q4FY19 GDP growth:
Nomura 
  • Q4FY19 GDP growth below market expectations.
  • Slowdown reflects a combination of global weakness and continued domestic drags.
  • Domestic drags reflect continued tighter financial conditions.
  • High-frequency data suggest the slowdown continues into Q1FY20.
  • Expect a slow recovery to start from Q2FY20, risking our FY20 forecast of 6.8 percent.
  • Expect RBI to reduce repo rate by 25 bps to 5.75 percent, with ‘neutral’ stance.
  • Expect RBI to state that it will keep banking system liquidity marginally positive.
  • HSBC Research
    • RBI is expected to cut rates by 25 bps at the upcoming June meeting.
    • Expect the RBI to maintain liquidity at a slight surplus.
    • Expect growth to pick up again to 7 percent ballpark in H2.
    • Weaker private sector activity dragged GDP growth lower than expected.
    • Slowdown was evident across agri, industry, investment and exports.
    • Growth is likely to remain weak in the next quarter, before improving in H2.
    • Goldman Sachs 
      • India’s GDP growth decelerated more than expected in Q4FY19.
      • Fixed investments and exports led the slowdown.
      • Expect to see a pick-up in the second half of the calendar year.
      • Lower oil prices, improved sentiment and progress on reforms to support growth.
      • NBFC concerns, if persist for longer, could pose a downside risk.
      • Citi Research 
        • Q4 GDP growth fell more than expected to 5.8 percent YoY, lowest since Q4FY14 led by a sharp slowdown in investment.
        • Investment’s contribution to GDP growth fell to 1.1 percent.
        • In annual terms, FY19 GDP also fell to a 5-year low of 6.8 percent YoY.
        • Some critical economic challenges require immediate policy attention.
        • Deutsche Bank 
          • Growth falls below 6 percent; RBI likely to cut repo by 25 bps and CRR by 50 bps.
          • Revise down FY20 full-year GDP growth forecast to 7 percent from 7.4 percent earlier.
          • Expect a negative base effect to keep GDP growth at 6-6.2 percent in H1.
          • Forecast growth momentum to improve to 7.5 percent + in H2FY20.
          • Credit Suisse 
            • Weak headline growth exaggerated by the high base.
            • Despite real growth declining in FY19, nominal growth was still 11.2 percent.
            • Nominal growth could slip sharply in the coming year.
            • With FY19 GDP growth 20 bps below estimate, cuts to FY20 forecasts are likely.
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