In a surprise move by RBI to inject durable liquidity in market, it announced to increase the purchase in two remaining OMOs from 10k to 15k crs taking total infusion to 50k in the month of December. Along with this, it also announced to do additional OMO of 50k crs in Jan, against market expectation of 40k crs.
This is big positive for equity and bond market, as it injects liquidity in the system which was pressing concern for the markets. We will see the spill-over effect of same in INR as well with 68 and below by March end. I expect bond also to rally and cannot rule out a possibility of 7.10 in near term and by Feb below 7%.
In my view, we are setting the stage for massive rally in all INR assets in next 3-6 months led by bond and equity with INR following closely.
Considering the high real rates in India, more than 3%, and inflation likely to print lower than 3% until Mar'19 and oil languishing below $60-62 and slowly drifting lower towards $50, I see two consecutive rate cuts in Feb and April policy before general election kicks in May.
The above domestic factors will be well supported by a dovish FED today when it is likely to give its outlook for 2019.
Time to pull up the socks and get ready for a joy-ride.
NF MAY TAKE U TURN FROM 11200.
MY PERSONAL VIEW , MAY DIFFER WITH YOU ALL.