“The RBI’s 25 bps hike and shift to a ‘calibrated tightening’ stance is a prudent, pre-emptive move. With crude above $100, a softer rupee and inflation broadening beyond food, waiting for the full pass-through to show up in CPI would have risked entrenching inflation expectations. The RBI also retained a robust 7.1% growth outlook, which signals confidence that it can tighten without hurting the economy’s momentum.
We see this as a shallow cycle rather than a prolonged one. Further action will depend on crude, the currency and the next two inflation prints. For long-term investors like insurers, higher yields offer an attractive opportunity to lock in returns on fresh accruals. We expect bond markets to remain volatile in the near term and will deploy gradually on yield spikes.”