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Will Coal India OFS success lead to a 25 bps cut?

The Bank of America country head said the January 15 policy statement of RBI mentions looking at the other macro factors including supply side and the fiscal numbers. So taking Coal India OFS into account, there is a probability of a 25 basis point cut tomorrow.

The market is not at all pricing a rate cut at this juncture. However, if that happens, bond yields will sink to 7.55 percent and then gradually below 7.5 percent, says Jayesh Mehta, MD & Country Treasurer, Bank of America.

He is among the people who says there is a slight chance of a rate cut due to a major macro event —  Coal India OFS — that took place on Friday. The Bank of America country head told CNBC-Tv18 that the January 15 policy statement of RBI clearly mentions looking at other macro factors including supply side and the fiscal numbers. So taking into account the Coal India OFS, which took place on Friday, there is a probability of a 25 basis point cut tomorrow.

Despite the success of Coal India divestment, the divestment target announced in last Budget is still far off, says Deven Choksey. He is convinced there is no merit in factoring in a rate cut. Since one repo rate cut happened only 15 days back, the stock market is not expecting another cut so soon, he said. Rather the street will wait to see the announcment regarding divetment programme in the coming Budget.
 
Speaking about the tone of the monetary policy, Mehta says he expect RBI governor Raghuram Rajan to be little bit more dovish than the January 15 statement, he will be more dovish on the inflation stance. As the poll predicted, RBI may also change their inflation forecast for the rest of the period.

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