#1. Lending rate cuts in April-May
Will lending rates really come down? We expect a 25bp lending rate cut in April- May with the onset of the slack industrial season. The RBI OMO and/or CRR cuts are pushing up deposit growth to 14% levels. At the same time, high lending rates will likely continue to drag down loan demand.
#2. Earnings to bottom out
Our equity strategists expect the coming results season to report March-quarter BSE Sensex headline profit growth at a weak 1% atop 0% in the December quarter. Note our equity strategists think FY14 Sensex EPS growth will be under 10% vs current expectations of 17%.
http://www.dalalstreet.biz/stocktips/2013/04/bofa-merrill-downgrades-fy-2014-sensex-earnings-estimates/#3. FDI in insurance in Budget session
Will Delhi persevere with reforms? We expect it to try to pilot legislation to hike FDI/FII limits in insurance to 49% from 26% (perhaps with 26% cap for FDI) in the current Budget session reconvening 2 April-10 May
#4. 25bp CRR cut on 3 May, 25bp rate cut in June, July
We expect the RBI to cut CRR by 25bp on 3 May, repo rates by 25bp in June and July, CRR by 25bp in October and rates by 25bp in January
#5. RBI to hold Rs52-56/USD
Can the RBI really hold Rs52-56/USD after the seasonal support of March fades away? Yes, if the US dollar trades in the current 1.30s-1.20s/€ range. We expect the RBI to buy FX at Rs52/USD to arrest the falling import cover.
