MUMBAI: India's first rate hike in four years is unlikely to slow or reverse record high capital outflows, leaving the central bank battling the vicious cycle of a weakening currency and higher inflation in a hostile global environment.
The modest hike of 25 basis points, even with signs of more to come, will do little to curb pressure on the rupee, while expectations for a weaker currency and a sharp jump in hedging costs are set to weigh on returns from both debt and equities.
