ET NowIn a chat with ET Now, RK Gurumurthy, Lakshmi Vilas Bank, expects the average inflation for FY16 to be well within RBI’s expected trajectory for another round of easing. Excerpts:-
ET Now: What is your view on the currencies trend from here?
RK Gurumurthy: Rupee has been ranging in a 65.50-66.75 range for the last couple of weeks. Given the fact that we also have an RBI policy on September 29, the borrowing calendar and month and quarter-end rollover, I suspect the rupee should be trading with a weaker bias. We expect rupee to test a little above 66.50 in the next few days.
ET Now: What about liquidity, which is in the deficit mode? How do you see the RBI managing liquidity at this point of time?
RK Gurumurthy: Actually liquidity is not really core negative. We had a little over Rs 45,000 crore in excess couple of weeks back. This fortnight it has been in the negative around Rs 50,000 crore that is because of the advance tax outflows.
I see liquidity turning positive or retaining to positive territory in a week’s time from now when spending kicks in. So, I do not think there is any urgent need to manage liquidity at this point in time.
ET Now: Can you clarify in terms of your expectation from RBI governor?
RK Gurumurthy: We expect a 25 bps rate cut.
ET Now: What are your projections are in terms of growth numbers as also the inflation trend?
RK Gurumurthy: Take CPI, for example, we seen a reading of 3.66 for the month of August, which in our opinion is possibly the lowest in this current series because whatever low we have seen is largely base effect.
So keeping that in mind and also taking into account the month-over-month increase between July and August, we expect the headline inflation to be around or above 7% in February.
So having said that, I still expect the average inflation for FY16 to be well within RBI’s expected trajectory, so that will pave way for either continuing another round of easing after the September policy, we expect another 25 bps of rate cut in FY16.
So far as the growth is concerned, we saw a 7% GDP number for the June quarter, while we do not see significant variation from there, our base case is between 7-7.5 for the coming quarters, unless we see strong recovery in manufacturing activity.
When I say about manufacturing activity, I also would like to draw attention on the IIP numbers, which we saw recently, manufacturing growth showed very strong numbers, 75% of the index, of course, is made up of manufacturing data and this is also a volatile series. The previous numbers have been widely revised so that is not serving to be any lead indicator about macro policies or macro- economics.
So, I would rather confine myself to what our take is on CPI and the next two quarters where we see inflation about.
ET Now: What is your view on the currencies trend from here?
RK Gurumurthy: Rupee has been ranging in a 65.50-66.75 range for the last couple of weeks. Given the fact that we also have an RBI policy on September 29, the borrowing calendar and month and quarter-end rollover, I suspect the rupee should be trading with a weaker bias. We expect rupee to test a little above 66.50 in the next few days.
ET Now: What about liquidity, which is in the deficit mode? How do you see the RBI managing liquidity at this point of time?
RK Gurumurthy: Actually liquidity is not really core negative. We had a little over Rs 45,000 crore in excess couple of weeks back. This fortnight it has been in the negative around Rs 50,000 crore that is because of the advance tax outflows.
I see liquidity turning positive or retaining to positive territory in a week’s time from now when spending kicks in. So, I do not think there is any urgent need to manage liquidity at this point in time.
ET Now: Can you clarify in terms of your expectation from RBI governor?
RK Gurumurthy: We expect a 25 bps rate cut.
ET Now: What are your projections are in terms of growth numbers as also the inflation trend?
RK Gurumurthy: Take CPI, for example, we seen a reading of 3.66 for the month of August, which in our opinion is possibly the lowest in this current series because whatever low we have seen is largely base effect.
So keeping that in mind and also taking into account the month-over-month increase between July and August, we expect the headline inflation to be around or above 7% in February.
So having said that, I still expect the average inflation for FY16 to be well within RBI’s expected trajectory, so that will pave way for either continuing another round of easing after the September policy, we expect another 25 bps of rate cut in FY16.
So far as the growth is concerned, we saw a 7% GDP number for the June quarter, while we do not see significant variation from there, our base case is between 7-7.5 for the coming quarters, unless we see strong recovery in manufacturing activity.
When I say about manufacturing activity, I also would like to draw attention on the IIP numbers, which we saw recently, manufacturing growth showed very strong numbers, 75% of the index, of course, is made up of manufacturing data and this is also a volatile series. The previous numbers have been widely revised so that is not serving to be any lead indicator about macro policies or macro- economics.
So, I would rather confine myself to what our take is on CPI and the next two quarters where we see inflation about.
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