A majority of analysts polled by Reuters last week expected a third consecutive 25 basis point increase in the key repo rate, now set at 6.50 percent, though speculation has mounted in recent days that the Reserve Bank of India (RBI) could opt for a 50 bps hike.
"The biggest policy anchor for rupee is high real rates".
The rupee Monday tumbled 43 paise to end at a two-week low of 72.91 against the United States dollar on steady capital outflows.
The current account has faced additional pressure as India, like many emerging market economies, has also suffered due to rising USA interest rates drawing investors away.
First of all, the heavy selling in markets is based on macro factors like weakening Indian rupee against the U.S. dollar and it is showing no inclination to strengthen.
China's financial markets are closed for the week.
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A navy vessel capable of taking 1,000 people at a time was due to be deployed to help with the evacuation. Roads and infrastructure are poor in many areas, making access hard in the best of conditions.
At its previous monetary policy meeting in August, the central bank raised the benchmark interest rate by 25 basis points to 6.50 per cent on inflationary concerns.
"For bond markets, a 25 bps hike accompanied by a hawkish stance could trigger the 10-year bond yield to rise to 8.25 percent", Rao told Reuters after yields surged on Thursday. Brent crude breached $86 per barrel level, near its four-year high, on Wednesday.
Consistent dollar demand from importers, mainly oil refiners, following higher crude oil prices, have kept the rupee under pressure.
India's gold imports are expected to rise further in the fourth quarter, putting the trade balance under more pressure, as investors seek hedges against faltering equities and the weak rupee.
"Indian rupee plunged to a fresh record low of 73.77 against the stronger USA dollar during the early morning trade", a market analyst said. One economist expected a 50 basis point hike to 7%.