By:- Murthy Nagarajan, Head – Fixed Income, Tata Asset Management.
“The stronger-than-expected Q1 FY27 GDP growth of 7.8%, driven by consumption, investments and exports, reinforces the resilience of the Indian economy. Coupled with double-digit capex expansion, the growth momentum has materially reduced expectations of a prolonged pause in interest rates despite geopolitical uncertainty. At the same time, elevated commodity prices, deficient rainfall and the RBI’s concerns around generalization of inflation pressure could make it increasingly difficult to maintain a neutral monetary policy stance. This has already translated into an upward bias in government bond yields and OIS rates. Additionally, strong credit demand, higher primary supply in the corporate bond market and widening credit spreads, particularly for NBFCs, are contributing to a steeper yield curve. Overall, the strong GDP print has rekindled expectations of a rate hike in the upcoming monetary policy.”