A big capex cycle starting in India; expect RBI to raise rates by 50 bps, say experts

India is seeing the start of a capex cycle and the broader NSE Nifty50 may not decline much, said market expert Mark Matthews of Bank Julius Baer & Co on Monday.

“There is too much local money on the sidelines that wants to buy when it (Indian equity market) does correct because the locals can see that the domestic economy is very strong and there is a big capex cycle that has just started, which will be financed by the banking sector, which is the biggest part of the index,” Matthews told CNBC-TV18.

Meanwhile, Indian shares suffered sharp losses on Monday, in tandem with global markets, as worries over monetary policy tightening and the pace of the growth of the world economy weighed down investor sentiment.

Ahead of the Reserve Bank of India's (RBI), Taimur Baig, MD and Chief Economist at DBS Group Research said that he expects a 50 basis points (bps) rate hike by the central bank on Friday, September 30.

“50 basis point rate hike is very much on the cards for the RBI. You can see in their gamebook; you can see what they have been doing over the last month or so. They are worried about incipient inflation pressure, the rupee depreciating in a disorderly manner, although relative to other currencies it has not depreciated that much, those sort of things do not make a central bank comfortable," Baig told CNBC-TV18.

For the entire discussion, watch the accompanying video