• Markets are likely to take the view that the RBI is not overly concerned with the slightly higher fiscal deficit targets for the next two fiscal years announced in the budget last week. 
  
  
• As such, expectations of further rate cuts could build, which would further weigh on USD-INR. At the same time, we expect the RBI to continue its intervention in the FX markets and aim to contain excessive trade-weighted INR appreciation.
  
  
• We maintain our short- and medium-term Overweight FX weighting on the INR. 
  
  
• The inter-meeting cut was a surprise to the rates market. Nevertheless, this move is positive for Indian Government Bonds (IGBs) and supports our Positive IGB outlook. 
  
  
• We expect the IGB yield curve to bull steepen in response to the rate cut. We continue to recommend buying 10Y IGBs (entry: 8.08, target: 7.40, stop-loss: 8.00).