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Below the Perspective on RBI MPC announcement by Piyush Baranwal, Sr. Fund Manager, WhiteOak Capital AMC

“MPC today delivered a second rate cut in successive meeting while also finally changing the policy stance from neutral to accommodative, thus giving further clarity on the trajectory of rates going ahead. Continued tariff wars could diminish growth globally, India included. This may depress prices of goods impacted by tariff walls as well as prices of various commodities, causing India’s inflation to remain under check. Together, these open up room for further rate cuts from RBI to the tune of 50 bps in the coming months, though the same can change quickly on either side given the elevated uncertainty.

Pertinent to note here that current lower spreads for Indian G-Secs vs. the US treasury when compared to the past may not necessarily be an impediment in these spreads narrowing further. This is on account of the unique issues plaguing the US bonds such as elevated fiscal deficit, compounded by potentially diminished inclination of global central banks and other investors in buying US treasuries unlike in the past. This is due to the seemingly erratic behavior from the US government, which has upended the globally established norms of trade and investments for both friends and foes alike, causing anxiety in the minds of the global community. 

Given the indications of continued policy easing and comfortable liquidity from RBI, we believe longer duration bonds as well as spread assets should likely outperform going forward. “

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