Anant Narayan, MD of Standard Chartered Bank has expressed his opinion on the RBI credit policy and he says that market is divided that whether CRR cut will take place or not. His transcrript in verbatim is as appended below:
The market is divided on the rate cut. There is a section of the market saying only CRR cut on January 24th and we are one of them. There is a section which says both CRR as well as repo rate cut. But I guess most participants are more or less agreed that by March there would definitely be some form of rate cut. What happens if there is no rate cut? More than the fact that there is a rate cut or no rate cut the direction on OMOs and whether the RBI will continue to buy back bonds using the OMO window could dictate the short term movements beyond January 24th. If the market gets a sense that a CRR cut has come through and that solves the liquidity issues then subsequent supply would come in. We will have relentless supply of bonds coming in throughout, Rs 102,000 crore more to go in this fiscal alone. That could keep bond yields supported and it could move back towards 8.35%-8.40% at that stage. With expectations of rate cut around the corner even by March that should get capped around those levels. So, 8.35-8.40% should cap bond yields for now until such time that given that expectations of monetary policy easing and of rupee being reasonably stable if not stronger.
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