By Vinay Pai, MD & Head of Fixed Income, Equirus Group.
“The RBI’s 25-basis-point repo rate hike marks an important inflection point amid heightened global uncertainty, with imported inflation increasingly feeding into input costs across goods and services. Elevated crude prices, currency pressures and global commodity volatility could keep inflation above the comfort zone for longer. This creates a challenging environment for the bond market, as sticky inflation and expectations of further rate hikes could push yields higher, particularly at the short end. While India’s growth outlook remains resilient, liquidity management will be critical. We expect the RBI to maintain a cautious tightening bias, with scope for further hikes if inflation remains persistent, longer period inflation and higher yields are to remain here for sometime”