RBI’s dovish stance, ongoing tax review likely to send Indian share prices even higher: Scotiabank

The Reserve Bank of India’s (RBI) dovish stance and the ongoing tax review will likely send Indian share prices even higher, supportive of the INR amid continued risk-on sentiment, according to the latest research report from Scotiabank.

India’s aggregate loans extended by the scheduled commercial banks rose INR216.45 billion to INR97.88 trillion as of October 11 from INR97.67 trillion a fortnight ago. On an annual basis, the nation’s bank lending growth slowed to 8.8 percent from 14.4 percent the same period a year ago, casting a shadow on India’s economic growth outlook in the months ahead.

"In our view, it will prompt the RBI to roll out more monetary easing measures to boost credit supply and revive growth in Asia’s third-largest economy," the report further commented.

In addition, The Economic Times reported Tuesday that the Prime Minister's Office (PMO) and the Finance Ministry are working on measures which may include dividend distribution tax (DDT) to be scrapped and a review of existing slabs and holding period of long term capital gains (LTCG), short term capital gains (STCG) and securities transaction tax (STT).

The latest primary-level phone call between the US and China could take optimism for reaching a partial US-China trade deal to the next level, sustaining risk appetite going forward.

Meanwhile, foreign investors could add to their positions in the so-called carry trade given persistent falls in the implied vols of USD/INR, Scotiabank further noted in the report.