A crucial factor will be the food CPI, which has stayed between 8% and 11% for much of the last 18 months. This figure is expected to drop below 5% for the first time in two to three years, making it a number that will be closely watched.
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According to CNBC-TV18 poll, the expected CPI figure is 4.1%, while the core CPI is projected to rise slightly due to a low base, coming in at around 3.8%.
On the other hand, the Index of Industrial Production (IIP) is not something people usually focus on, but the expected number from recent estimates is 3.2%. This suggests that industrial growth is not showing significant momentum.
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A major event for the bond market is also taking place — the Reserve Bank of India (RBI) is set to buy ₹50,000 crore worth of bonds in one go.
However, market movement is not expected as these events have been anticipated for a while. Investors have known that February inflation would drop and that the RBI has been injecting liquidity and planning this bond purchase for the past two weeks.
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Another key factor to watch is the US CPI data, which will be released later in the evening after Indian bond markets close. Expectations are for a number below 3%, with 2.9% being the likely figure. If this happens, it would be positive news for bond markets.
The real shift in bond yields in India is expected next quarter. At that point, supply will likely be lower than demand, foreign funds may return, the RBI will continue buying bonds, and a rate cut is expected. A bond market rally is more likely then, while current expectations are already factored into prices.
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(Edited by : Unnikrishnan)
