Will the RBI cut interest rates this month?

The INR fell 3.5% last month, marking the third worst Asian performance after the MYR (-8.6%) and IDR (-3.8%). Despite lower oil prices (lower trade deficit), portfolio outflows (equities) have accelerated from India. CPI fell to a low of 3.78% in June from 5.4% while Q2 GDP growth slowed to 7.0% yoy from 7.5% in Q1. 

A rate cut by the RBI is not ruled out on 29 September, but odds will keep fluctuating depending on China and the Fed rate decision. India is in a good position relative to Asian peers thanks to stronger growth prospects and moderating inflation, low ST currency liabilities and a narrowing fiscal deficit. Governor Rajan has reiterated that the RBI is not averse to drawing down the $380bn of FX reserves to counter rupee volatility.