We expect two rate hikes by Reserve Bank of India (RBI) this year, said Pranjul Bhandari, Chief India Economist, HSBC.

"At this point, the RBI is going to keep to about one-two rate hikes, we have two in our forecast because, we don’t see any reason for it to become deep cycle at this point," Bhandari said.

Speaking exclusively to CNBC-TV18, she said, "We have been expecting 50 bps in rate hikes this year. Two 25 bps hikes and the chance of a June hike is increased at this point. So a big chance of a rate hike in June."

“It is possible for the RBI to keep the neutral tone and hike. There is a high chance that they will also make a call for a tighter stance in their tone,” she added.

“Forward guidance will be the most important thing that the market will be looking out for because the market wants to know how many rate hikes in the cycle. At this point, two-three rate hikes are already priced in," Bhandari said.

"If the RBI is going to keep two-three rate hikes, then there might be some sort of comfort in the markets. If the RBI signals that this is a start of a big deep rate hiking cycle, then the market can get a bit nervous,” she said.

The RBI will release its monetary policy on Wednesday afternoon and all indications are that a rate hike is coming.

First Published:Jun 4, 2018 1:35 PM IST