Over to RBI now

A near-stall-speed 0.1% IIP growth for April, coming the day after S&P reiterated its downgrade-to-junk warning, and all eyes are once again on RBI. Indeed, despite the disappointing 5.8% GDP growth in Q4, if the Sensex greeted the IIP numbers with a 195 point rally, it was because market players expect the worsening economic scenario to force RBI into making even larger rate cuts. Though a large rate cut looks unlikely in view of the inflation threat—in April, RBI had cited upside risks to inflation while cutting rates by 50 bps—a rate cut is near certain, with the odds highest on it being 50 bps.

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