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Comment on Pre RBI Policy By Pankaj Pathak, Fund Manager-Fixed Income, Quantum AMC

Recession fear in the US and in other parts of the world have been somewhat positive for India. Sharp drop in commodity prices and a pickup in monsoon should ease some pressure from the RBI. It may, nonetheless, hike the repo rate by another 50 basis points just to withdraw the excess monetary accommodation provided during the pandemic. We expect the RBI’s commentary to soften a bit with an acknowledgement that inflation risks are receding.    

From the bond markets perspective, much of this is already priced in as bond yields have fallen by over 25 basis points from their recent peak. Indian bond yields will likely trade in a tight range in coming months. From the monetary policy,  the bond market will look for indication on the total quantum of rate hikes in this cycle.

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