Indian bonds gain after RBI Chief says room exists for rate cut

Indian bonds extended gains after the Reserve Bank of India Governor Sanjay Malhotra said the latest data suggests there’s scope for an interest-rate cut.

Malhotra noted that the Monetary Policy Committee had already signaled room for policy easing at its October meeting, and the indicators since then — including inflation — have not diminished that expectation, he said in an interview with Zee Business on Monday evening. It is up to the rate-setting panel to take a call at its upcoming meeting early next month.

The benchmark 10-year bond yield fell four basis points to 6.48% after the comments.

Malhotra said the rupee’s recent weakness is a natural outcome of inflation gap with advanced economies. A 3%–3.5% annual drop is typical for the currency, he added, noting that the RBI’s focus is on containing excessive volatility rather than defending any specific level.

The rupee, which hit a new fresh low against the dollar on Friday, is Asia’s worst performer this year, having weakened about 4% versus the greenback.