Bucking the regional trend, India's stock market is preparing to open higher after the central bank rolled back some of the emergency measures designed to prop up the rupee.
The Reserve Bank of India cut the marginal standing facility rate by half a percentage point to 9 per cent, a move that should help liquidity.
The MSF is the penal rate at which banks can borrow cash from the RBI after other options have been exhausted. But because of restrictions imposed on bank lending at the policy repo rate, ANZ notes the MSF "remains the operative rate for overnight money," so the cut should ease financial conditions.
The RBI had already cut the rate from 10.25 per cent on Sept. 20.
Futures on the Nifty Index are pointing 0.8 per cent higher. The market opens at 11:45am Hong Kong time.
The FT's James Crabtree in Mumbai offers this context:
In July, before Mr Rajan took the helm at India's central bank, the RBI introduced measures to tighten liquidity in India's economy as part of a mostly unsuccessful attempt to protect the battered currency, which went on to fall to repeated record lows against the US dollar during August.
But the US Federal Reserve's unexpected decision in September not to "taper" its $85bn-a-month quantitative easing programme eased pressure on emerging markets, including India, giving policy makers space to unwind protective policies. Mr Rajan has tried to strike a delicate balance since the Fed's decision, trimming some emergency measures to avoid choking off growth while also raising base interest rates in late September, to counter inflation.
While the Nifty looks up, the Nikkei 225 index is 0.4 per cent weaker, Korea's Kospi is down 0.6 per cent, and Australia's S&P/ASX 200 is down 0.65 per cent.
Financial Times
