India's 10-year bond yield dipped 9 basis points on Thursday after the Reserve Bank of India cut rates and signalled more easing ahead. The 10-year bond yield fell 9 basis points to hit a fresh 18-month low of 6.933%, from its Tuesday's close of 7.02%. Bond prices and yields move in opposite direction.

The RBI today changed its monetary stance to “accommodative" from "neutral" and lowered its growth forecast for the current fiscal year to 7% from April's projection of 7.2%. The RBI revised its inflation forecast for April-September to a range of 3-3.1% up from 2.9-3% seen in April. This forecast is still lower than the 4% medium-term inflation target of the central bank.

Analysts say lowering the growth forecast suggests more easing by the RBI going forward.

The RBI reduced the repurchase rate by 25 basis points to 5.75%, its lowest in nine years. This was predicted by 31 of 43 economists surveyed by Bloomberg. The six-member Monetary Policy Committee voted unanimously for a rate cut.

"The debt market will take this as a significant positive move, though most of the rate cut cycle is probably over. The tone of the RBI policy was dovish and highlights concerns on growth. We maintain our call for another 25 bps rate cut in August factoring in the benign inflation trajectory and the rising concerns on growth," said Suvodeep Rakshit, senior economist, Kotak Institutional Equities.

"However, transmission of the rate cuts will be key and the RBI should aim to maintain liquidity, at least, at neutral over the next few months," Rakshit added.

The rupee closed flat to 69.28 a dollar, up 0.03% from its previous close. Stock market benchmark Sensex fell 1.38% to 39,529.72 points. So far this year it has risen 11%.

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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