Citi expects CPI to undershoot RBI's target, rate cut in Q1

Rohini Malkani, Citi says both sets of macro data beat expectations. “Going forward, while CPI will likely trend to 5.5 percent in January-March quarter as the base effects reverse, the outlook remains sanguine due to commodity prices, government measures on food inflation and deceleration in rural wages,” she adds.

She expects CPI to undershoot RBI's 6 percent target through 2015 and average 5.5 percent, strengthening the case for monetary easing. “On rates, while the fiscal deficit remains a challenge, given the growth-inflation dynamics, we maintain our view of the first rate cut in Q1CY15 and a cumulative 100bps cut till FY16... but wouldn't be surprised if RBI does cut before the February Budget,” says Malkani

Also read: IIP to get better; rate cut likely in Feb RBI meet: Experts

Ajay Kapur, Bank of America Merrill Lynch says the brokerage hosted about 40 senior investors at its CIO conference in Hong Kong on January 9. “Our polling of the room showed: their favorite market is China, followed by India. Zero bulls on ASEAN and Taiwan. Tech/financials were the popular sectors, energy/materials the least favored,” says Kapur.

“The room was USD-bullish, preferred developed markets to emerging markets, and the US was their favorite equity market. We are advising clients to buy rate-sensitive China, even though a short-term pullback is likely, Buy India - the new "lucky country" and buy stocks with high-ish dividend yields and growth,” he adds.