INR opens weaker at 69.20 as against yest close of 68.78 and may trade in range of 68.90 to 69.30. Overall, if INR stays above 69.0 levels for few days, we may see higher levels of 69.50-69.60 in coming days. Yesterday US Fed dropped interest rate by 0.25% but future cuts were left uncertain ( market was thinking a clear guidance on future cuts also). This led to sharp sell off in US equities and rise in USD.
On domestic side, we believe that in forthcoming meeting, RBI is most likely to cut rate by 0.5% and may guide for further cuts in coming months. Our research indicates a total interest rate reduction by RBI of about 1.5% over next 12 months. It is not necessary that interest rate cut by RBI will translate into reduced interest on loans. It would be a function of which MCLR is the interest mapped and which is the lending bank. Some banks cut MCLR closer to Rbi cuts, down so less and some may even increase!