In its latest monetary policy review, RBI has kept key interest rates unchanged. However, the statutory liquidity ratio has been reduced by 50 basis points to 21.5 per cent of deposits. RBI has taken a stance to wait till the budget is unveiled for further changes in key rates. We feel that RBI would cut rates further by around 50-75 bps in the current year, to support growth.
On the global front, an array of factors has been affecting our domestic currency. The recent massive stimulus by ECB may result in further inflows in to the Indian economy leading to strength in rupee, but on the other hand, its positive implications for the dollar index would result in a negative impact on rupee.
Meanwhile, our positive set of macro data and reform push by the government ,would help rupee offset the strength witnessed in dollar index.
We expect rupee to strengthen towards 59 mark in another three months.