India's industrial output may continue to weaken in the coming months and further rate cuts could come at any point, HSBC said on Wednesday.
"Production growth looks set to weaken further as the full force of the developed world recession, the lagged effects of the previous rate rises and the domestic credit-crunch hit home," said Robert Prior-Wandesforde, an economist at HSBC.
"Indeed it is not impossible that we could see production growth turn negative for a month or two as companies work off inventories built in anticipation of a reasonable strong festival season which seems to have disappointed," he said.
Motor vehicle sales in particular were very poor, he said.
Industrial output rose 4.8 percent in September from a year earlier, above the previous month's upwardly revised 1.4 percent, data showed on Wednesday.
"The direction is clear and, unfortunately, increasingly likely to be associated with job losses," he said.
Prior-Wandesforde said the Reserve Bank of India could cut its repo rate, at which it lends to commercial banks, from 7.5 percent. It has been cut by 150 basis points in 2008.
HSBC also expects a cut in reverse repo rate, at which the central bank absorbs surplus cash from banks, from 6 percent.