Sameer Goel, head of Asia macro strategy at Deutsche Bank, spoke to CNBC-TV18 about the RBI governor’s interview, potential rate cuts and rally in bond markets.

Share Market Live

NSE

“The RBI governor’s recent interview seems to be giving an impression and rightly so that he wants to moderate some expectations regarding how much quicker this rally can get to or how much further the pace of easing might be,” Goel said on Monday.

“Ultimately, we are still looking for more rate cuts in the cycle and that would translate into a further rally in the market, to my mind, for 10-year yields to eventually go below 6 percent. Potentially, at the moment we think a trough closer to about 5.75 percent; the timing is still uncertain, probably over a few months but certainly there is more to go,” he said.

Talking about the rate cuts, Goel said, “Our house call is for 25 bps cut in the August policy. We also do think that there is another 25 to go from there in this cycle for now.”

“I think it will remain to be seen both in the August policy and following after as to whether the RBI signals scope for more easing to come, but to our mind the fact that we are potentially heading for another year where the average inflation will be below 4 percent. I think it certainly justifies rates to be down at least till 5.25, potentially beyond, but that’s something we still need to assess,” he added.

On the currency front, he said, “I would be bias towards little bit more appreciation or strength for the currency, at least on relative basis versus the other more trade-sensitive, more low yielder currencies in the region, but even versus the dollar I would be biased for a little bit more strength though the bigger narrative, I still feel, is in rates and duration than necessarily in currency.”

“I would be biased more for a range over the next few months probably lower to 68-70/USD and towards the lower part of 68-70/USD range. Ultimately, by the end of the year and towards the close of the next fiscal we probably see it rebounding back more closer to about 70/USD level,” Goel added.