The market is holding on to gains of about 0.4 percent this morning ahead of the policy decision. (Nifty Bank is up 0.7 percent.) No rate cut will likely be taken in stride but a suprise cut may send stocks soaring.
The Reserve Bank is expected to cut rates only in its August 9 policy review meet, as normal rains are expected to contain agricultural inflation and help in the uptick of rural demand conditions, says a report by Bank of America-Merrill Lynch.
Then there is the small matter of the RBI's liquidity policy, which underwent a drastic change during the last policy decision where the central bank decided to move the Indian financial system from a perennial liquidity-negative situation to liquidity-neutral.
Any commentary on liquidity would offer market participants more insight into the governor's stand on the subject.
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