With the Reserve Bank of India's Monetary Policy Committee meeting just around the corner, brokerages have offered mixed outlook on the MPC's near-term path, though they have flagged rising inflation risk and an increasingly uncomfortable external environment.
Citi: Most Hawkish
In its latest note, Citi has brought forward its rate hike views following fuel price hikes that exceeded its base case assumptions.
The cumulative Rs 7.5 per litre increase in petrol and diesel prices last month has prompted the brokerage to revise its FY27 average inflation forecast upward to 4.9% from 4.6%, with core inflation now seen at 4.6% versus 4.4% earlier.
Citi expects higher seasonal volatility in vegetable prices and above-average inflation momentum driven by a weaker monsoon and higher input cost pass-through.
While it expects the June MPC to keep rates on hold, it now anticipates two 25 basis point hikes in August and October.
Goldman Sachs: Hold With Hawkish Tilt
Goldman Sachs expects the MPC to remain on hold at the June meeting and retain its neutral stance, but anticipates hawkish forward guidance.
The brokerage sees Q1 CY26 real GDP growth at a resilient 7.2% year-on-year, but flags headline inflation rising above 5% in the second half of CY26.
Goldman noted ample liquidity but tighter term funding conditions, and said the bar for rate hikes to defend the currency is high, though it does expect the RBI to announce measures to incentivise dollar inflows.
BofA: Difficult Backdrop
Bank of America described the RBI as "staring at a difficult policy backdrop," noting that a hold is likely the most logical choice for June even as strong arguments exist in favour of a hike.
BofA expects the RBI to eventually tighten policy despite not seeing either significantly higher inflation or very strong economic growth, with the external environment remaining "highly uncomfortable."
ALSO READ: RBI MPC Meet: Rates Likely To Remain Unchanged Amid Middle East Crisis
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
