Sharp fall in OIS rates leads to deeper rate cut speculation

“Since the last RBI meeting, India's 1-year swap onshore OIS declined from 6.34 to 5.88, implying more rate cuts from the central bank.  That will lower the finance cost for the EMIs of loans in the coming months,” said Dilip Parmar, research and forex analyst at HDFC Securities.

There is wide speculation in the market that the RBI will cut repo rate by 25 bps in its April policy, and by 25 bps in June. But experts said that OIS rates are suggesting more than 25 bps rate cut in April.

The speculation about a rate cut emerged after retail inflation dropped below the RBI’s medium- term target of 4 percent and concerns over growth amid US tariffs. It opens up a wider space for the central bank to act on rates.

A Moneycontrol’s poll of 21 economists, treasury heads and fund managers showed that the RBI is expected to cut the repo rate by 25 bps in the upcoming monetary policy on April 9.

India has been facing growth challenges – despite a rebound in the third quarter of the financial year 2024-25 – which have now been exacerbated by the latest round of reciprocal tariffs.

Last week, Trump unveiled global reciprocal tariffs, under which the US would levy a 34 percent tax on imports from China, a 20 percent tax on imports from the European Union, 25 percent on South Korea, 26 percent on India, 24 percent on Japan and 32 percent on Taiwan.