RBI likely to maintain status quo; watch for the outcome of recent tightening measures - ICICI Bank : Treasury Research

In the quarterly monetary policy review on 30th July, we expect the Reserve Bank of India to keep the policy rates (repo rate and CRR) unchanged. Over the last two weeks, the Central Bank has taken a slew of liquidity tightening measures, to implement an interest rate defense for the depreciating Rupee.

The measures are aimed at putting sharp upward pressure on the rates by increasing the cost of liquidity, in an attempt to ease the FII outflows particularly in the debt market.

We expect the Central Bank to defer repo rate changes till the liquidity tightening measures from the RBI are withdrawn.

The guidance will be closely watched in order to assess the conditions for withdrawal of these measures and gauge the possible duration for their implementation.

We await announcements from the Government with regards to financing of CAD through issuance of NRI bonds or other steps to sustain the recent Rupee appreciation.

Source : Equity Bulls

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