Yahoo Finance StanChart Sees Room for RBI to Lower Rates, Buoying Bond Inflows
(Bloomberg) -- India’s central bank has room to lower interest rates, which may help intensify inflows into the nation’s bond market, according to Standard Chartered Plc.
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“Core inflation is trending much below 4%, which is a strong relief for the central bank, while the repo rate is at 6.5%,” Parul Mittal Sinha, the bank’s head of India financial markets, said in an interview with Bloomberg Television on Friday.
She sees headline inflation averaging 4.5% in the fiscal year through March, and expects a shallow rate-cut cycle of around 50 basis points, with the first move coming as early as October. India’s next inflation print due July 12 will give investors clues on possible rate cuts ahead of the August monetary policy meeting.
Flows into India’s bonds will continue as the nation’s weight on JPMorgan Chase & Co.’s emerging market index rises over the coming months, Sinha said.
Overseas investors have already put in $11 billion in government bonds since the September announcement of India’s index entry. The country gained 1% weight in the gauge on June 28 and it will be gradually raised to 10% by March.
“As and when the global yields start moving lower, and if the RBI also starts cutting rates, the intensity of inflows might pick up,” she said. “Capital gains look like they are just around the corner, we are very optimistic.”
--With assistance from Anand Menon, Subhadip Sircar and Paul Allen.
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