The Reserve Bank of India has thrown a lifeline to the financial system, and markets are loving it. After announcing an $18 billion cash infusion late Monday to tackle the worst liquidity crunch in over a decade, both bonds and stocks rallied, with banking heavyweights like ICICI Bank and HDFC Bank leading the charge. The RBI’s move has reignited hopes of a rate cut as early as February 7, with analysts now betting on an easier monetary policy stance to support an economy growing at its slowest pace in four years. This cash injection isn’t just about plugging liquidity holes; it’s setting the stage for smoother policy transmission when rate cuts begin. Lower bond yields, cheaper borrowing costs—it’s all part of the package. On Tuesday, the yield on the 10-year benchmark bond fell four basis points to 6.64%, while the rupee took a slight hit, underscoring the delicate balance the central bank is managing. Big players like Goldman Sachs and Citibank wasted no time revising their forecasts. Goldman now expects a quarter-point rate cut next week, followed by another in April. Standard Chartered also shifted its call for a rate cut forward, signaling confidence that the RBI’s liquidity boost is more than a short-term fix.