Bond yields slipped and the rupee fell to an record intra-day low on Tuesday with bets rising on the Reserve Bank of India (RBI) governor Sanjay Malhotra being more receptive to interest rate cuts because of growth concerns.

Brokerages and analysts feel chances of a relaxation of rates in February have increased significantly with the arrival of Malhotra.

Economists were previously divided between a reduction in February and April as they were expecting an extension to Das for at least a year.

The markets are now even toying with the idea of a rate cut before the February meet of the monetary policy committee (MPC) of the RBI or a reduction of more than 50 basis points in February.

At the inter-bank forex markets, the rupee settled at 84.8525 against the dollar after touching a record low of 84.8575. On Monday it had closed at 84.73 against the greenback.

In the bond markets, Reuters reported yields on the benchmark 10-year bond closing at 6.7073 per cent against its last close of 6.7175 per cent.

The central government on Monday appointed revenue secretary Sanjay Malhotra as the 26th governor of the RBI.

While little is known about Malhotra’s view on the current interest rates, the markets feel he could turn dovish as real GDP growth fell to a 7-quarter low of 5.4 per cent in the second quarter even as there could be relief on the food inflation front.

“The rupee weakened further, slipping below 84.85, as sustained FII selling and escalating geopolitical tensions continued to weigh on sentiment. The end of Shaktikanta Das’s term as the RBI governor and the appointment of Sanjay Malhotra introduces unfolded packages into India’s financial landscape. Market participants remain cautious as this leadership change could bring shifts in monetary policy and financial market dynamics,’’ Jateen Trivedi of LKP Securities said.

Brokerages feel a rate cut is imminent in February.“Our estimates suggest headline CPI inflation has likely peaked and could soften toward 4.5 per cent year-on-year by the June 2025 quarter. We think the balance of risks is becoming increasingly tilted towards weaker growth especially as the risk of a potential US tariff hike on China becomes more tangible,’’ Tanvee Gupta Jain, chief India economist at UBS Securities said.

Jain said the high real policy rate and softening growth could create room for the central bank to lower the repo rate by 75 basis points beginning February 2025.

A note from brokerage Nomura said in the case of bureaucrats joining the RBI, it was observed there was a greater alignment with the government’s way of thinking in the initial period. However, over a period of time this has changed with more alignment seen with the RBI’s ``institutional thinking’’.

It felt that with another finance ministry insider leading the RBI, there could be a ``likely shift towards more accommodative monetary policy’’. “There is some possibility of a bigger 50 basis points catch-up move upfront, though this will likely be data-driven’’, it added.