Economic Outlook

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Oct 04, 2023

QuantEco Research || India Macrobook Sep-23

Core Views:  We maintain our call of moderation in GDP growth to 6.0% (with upside risk) in FY24 from 7.2%. We maintain our FY24 CPI inflation forecast of 5.5%.Lingering of inflation risks in the near-term and upward pressure on global rates is likely to prompt MPC to remain on an extended pause through FY24. While we expect repo rate to remain unchanged until Q1 FY25, the RBI could signal its ‘steady for longer’ bias by curbing core liquidity surplus to ensure money market rates trade in the upper band of LAF corridor. An extended pause from MPC, expectation of a moderation in inflation trajectory and index inclusion related market positioning could push 10Y g-sec yield towards 7.00% by Mar-24 (7.40% could be the toppish level in the near-term) We expect Fed to lead the rate cutting cycle from Q2 2024 – this is likely to weigh on the USD as clarity on the timing of Fed pivot emerges in the coming quarters. We expect rupee to see a moderate backloaded appreciation (aided by a favorable BoP outlook), with USDINR likely to move towards 82 levels by Mar-24. However, in the near-term, there is a possibility of a depreciation towards 84 levels on account of continued US economic resilience and geopolitics led disruption in commodity markets.