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Oct 04, 2017 02:23 PM IST IST | Source: Moneycontrol.com
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Watch this video to understand how interest rates work.
Pressure has been mounting on the RBI to cut rates this time around as macro-economic indicators are getting grimmer by the day. But the RBI might still stay pat. Read the full story here.
Bankers have said that although they expect the RBI to keep rates unchanged, they expect a slightly dovish tone from the central bank. At 14:10, the 10-year benchmark bond yield was trading 2 basis points lower than its previous close at 6.62 percent, while the rupee was trading 0.2 percent against the dollar at 65.34.
Banking stocks were trading largely flat ahead of the monetary policy announcement. State Bank of India was trading 0.4 percent higher while ICICI Bank was trading 0.5 percent lower. Axis Bank and HDFC Bank were trading marginally in the red.
Auto, real estate and housing finance stocks were all trading in the green ahead of the announcement. Read the full story here.
Market participants will watch out for forecast on inflation and GDP growth in RBI's monetary policy statement. Commentary on the government's finances and the voting pattern of the Monetary Policy Committee members are some of the other things that will be keenly eyed.
The Confederation of Indian Industry (CII) recently called for a 100 basis points cut in interest rates, saying it was the only way to boost the economy.
Several other bodies and the government have also made calls for a rate cut to help India out of the slowdown it is currently experiencing.
Given the prevalent concerns about a slowdown in the economy, economists expect the RBI to exercise caution and keep rates unchanged.
India's GDP growth slowed down to a three-year low of 5.7 percent at the end of the June quarter and consumer inflation hit a 5-month high of 3.36 percent in August.
The RBI has a target of keeping consumer inflation at around 4 percent and given the recent rise in crude prices, which are currently near a 2-year high, the central bank might want to keep a hold on inflation for the time being.
The Reserve Bank of India's Monetary Policy Committee is scheduled to announce its fourth bi-monthly policy for the year at 14:30 IST.
Bankers and economists expect the central bank to keep rates unchanged but market participants and the government are both hoping for a 25 basis points rate cut.