Looking ahead, we think the Indian economy’s bottoming, but bottom out – 7.1% FY11 growth (7.5% earlier) – will likely stretch end-09. This assumes the G-3 stabilize 2H09: ECB likely cuts 50bp Thursday.
Merrill expect continued intervention against contagion from Asian fx volatility. Expect a 50bp cut by April.
Given INR volatility, the RBI might want to hoard its dwindling quiver of rate cuts to comfort sentiment in case a global shock pulls down equities. Even if the RBI holds for now, we expect Delhi will continue to push banks to cut lending rates here.
WPI inflation to slip to 3.1% from last week’s 3.4% en route summer 09 deflation. Delhi is likely to cut cooking gas and/or diesel prices one more round before the summer 09 polls between april-16th aand May-13th.