India MPC session is distant away (4-6 August) and retention of buy mode on run upto policy verdict is 12 trading sessions away; what could be pre-policy outlook when nothing major to emerge on policy rates - either pause or 25 bps cut, both considered non-event at this stage!
There’s no issue on system liquidity but what matters is the usage of it adjusted for reverse flow into R/R counter! This is what @RBI should work on before tinkering with policy rates when operating policy rate is already very low at 3.35%! How to cut the R/R flows to zero?
LAF corridor expansion at 3.35-4% (upping the spread from 25 to 65 bps) haven’t helped, bringing the need to think different! So, (a) R/R rate cut is no sense (b) Repo rate cut is irrelevant when not in operation bringing the need to (c) close of R/R counter or through auction
Given these compulsions on @RBI to stay in rate pause mode & to push overnight interbank rate to around Repo rate, there’s high probability for #Nifty turnaround from 10200-10350 and #banknifty from 23000-23500, but don’t see immediate cues to see beyond 10000-10350 (19500-21250)
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