Acknowledging that it is a "contrarian call", analysts at Bank of America Merill Lynch (BofA-ML) said daily data show that food inflation has continued to trend lower in May on a good summer rabi harvest, which will help contain overall inflation under 4 per cent for the first half of 2017.
"Based on sowing data, we've been expecting bigger oilseed (6 per cent growth) and pulses (11 per cent) rabi summer crops that will pull down prices," the brokerage said.
The Met Department is more confident of its forecast for 96 per cent of normal rainfall with the El Nino weather pattern likely to be delayed, it said.
But a private weather forecaster today reiterated its view of a below par rains this year.
Also Read
A stronger rupee, coupled with the oil price rally losing steam, is cutting the risk of imported inflation, the American brokerage said.
The Reserve Bank is targeting to bring down inflation closer to 4 per cent, the median of the target set for it by government in the medium term.
This has led many analysts to dismiss possibilities of more cuts in the rates and most of them are forecasting a status quo in rates from RBI, as it had done at the last policy review in April.
Disclaimer: No Business Standard Journalist was involved in creation of this content