Interest rates in India may be slashed by 125 basis points during the 2012-13 financial year, thanks to lower inflation below 7%, Credit Suisse Ag said in its latest forecast made in Singapore on Friday.
"We are looking at the first rate reduction of 25 basis points by April and a total of 125 basis points reduction in repo rates during fiscal 2012-13," bank director Robert Prior-Wandesforde told reporters at the bank's 2012 Global Outlook Media Roundtable held in Singapore on Friday.
Prior-Wandesforde also said India's annual economic growth rate would be sub-7% for the 2012-13 fiscal, given softening global trade, though the US economy was showing signs of a recovery.
"But the good news is the lowering of inflation rate, which would be sub-7% for the 2012-13 financial year," he said.
Interest rates rose far more than expected last year and have peaked.
"Now we are seeing the inflation rates coming down, even though it is early days of the New Year," said Prior-Wandesforde, adding that lower inflation would reduce
pressure on the government to keep interest rates high.
He also expected the Indian equity market to perform better in the next 12 months than it has in the past year, though the rupee would remain "very vulnerable".
Nevertheless, the rupee may strengthen back to levels below Rs 50 per US dollar in the next 12 months.
Prior-Wandesforde said foreign investors were not expecting any key structural changes to foreign investment in India.