Tag: BoFA-ML

RBI expected to cut rates by 25 bps: BofA-ML

RBI expected to cut rates by 25 bps: BofA-ML

29/03/2016 14:31

A report has said that India’s retail inflation for March is expected to be around 5 per cent and the Reserve Bank is likely to cut its key rate by 25 basis points each at its policy reviews on April 5 as well as in August.

According to Bank of America Merrill Lynch (BofA-ML), its inflation indicator is tracking March CPI inflation at 5 per cent, slightly lower than February’s 5.2 per cent.

Commenting on the issue, a BofA-ML Official told the media, “We continue to expect the RBI to cut rates 25 bps on April 5 and in August.”

The declining inflation and negative industrial outlook have strengthened the case for RBI cutting interest rate in its first bi-monthly monetary policy for 2016-17 on April 5.

RBI Governor Raghuram Rajan on February 2, left the key interest rate unchanged citing inflation risks and growth concerns.

6 Risk Events investors need to watch out for this month (July 2015)

6 Risk Events investors need to watch out for this month (July 2015)

Investors, beware of these six events.

The Greek Economy is coming down crashing like nine pins and a recent report by BoFA-ML suggests there are at least 6 event risks investors need to be aware of and prepare in case need be.

India economists, Indranil Sen Gupta and Abhishek Gupta at Bank of America suggests that there would be no immediate resolution of the Greek Crisis with rising Grexit risks.

Here are the six events that BofA-ML lists:

May IIP: BofA-ML estimates that May industrial growth will slow to 2.8 per cent on July 10 from 4.1 per cent in April. The report also suggests that the recovery shoud be back-ended as lending rates take about six months to support growth. They also comprehend GDP (gross domestic product) growth slowly bottoming out to 6 per cent (in the old series) in FY16 from 5.5 per cent in FY15.

June Inflation: BofA-ML pegs consumer price inflation (CPI) at 5.4 per cent, higher than May’s 5 per cent, which will be driven by higher prices of pulses; increase in service tax could raise CPI inflation by around 20 bps (basis points); and fall in petrol deflation to -2.6 per cent in June from -8.9 per cent in May that could impact CPI inflation by 10-15 bps. In this backdrop, they expect the Reserve Bank of India (RBI) cut rates by 50 bps by early 2016 with inflation well on track to its ‘under’-6 per cent January 2016 target.

Monsoons: Let’s face it, monsoons are unpredictable. So even if June runs smoothly, the standard monsoon accounts for only 15.2 % of the seasonal rainfall. So be on your toes, as a clearer picture can only be expected by mid-July according to the report.

Parliament Session: According to BofA, the recent controversies in the political scenario do not send positive signs for a seamless passage of GST or amendments to Land Acquisition Act during the upcoming monsoon session of Parliament beginning 26 July. Currently, the market is over rating the contribution of either legislation to grow.

BofA comments, “We believe that lending rate cuts, rather than reforms, hold the key to an immediate cyclical recovery by say, end-2015. Reforms will support growth only over, say, 5 years and so, it does not really matter where they are legislated in this parliamentary session or next,” in the report.

Corporate results: Though overall turnaround is expected around September onwards, analysts at BofA-ML expect Sensex profit growth to recover to about 4 per cent in the June quarter from -0.1 per cent in March on standalone basis.

FOMC meet: “Despite improving data, the bond market is pricing in only about a one-in-five chance of a rate hike in September,” BofA-ML says. The reports also suggests, the US Federal Reserve (US Fed) could give clues to the possibility of a hike in interest rates in the upcoming policy meet on 28/29 July.