The rapid shift in global sentiment, high market volatility, and fear of recession following the US tariff shock point to a 25bps cut by the Reserve Bank of India (RBI) on April 9, with a possible shift in stance to "accommodative" to provide a directional easing bias, according to a report released on Tuesday.

On Monday, the Central Bank's Monetary Policy Committee (MPC) began its three-day meeting.

"The extent to which this global trade war could last is unknown. This year, India's monetary policy may have to do more countercyclical work than fiscal policy." Emkay Global Financial Services stated in the note that the implications for India could stem from both global financial market disruptions and real sector hits.

While there is room for negotiation and de-escalation, "we believe this could be a watershed moment for emerging markets (EM) assets in the coming months."

However, given the volatility of global markets, the RBI may not want to use all of its ammunition too soon, so cuts may not be frontloaded in April.

"Options like non-conventional easing in the form of easier regulatory (lending) norms, lower daily CRR requirement for banks to sub 90 per cent, sterilised INR management, etc may be used, if needed," it said.

In the near term, however, the liquidity framework may be overhauled in favor of daily variable rate repo (VRRs) rather than 14-day VRRs as the primary tool for banks' asset liability management (ALM) and liquidity management.

According to the report, the RBI will need to be agile in managing the risk of tighter financial conditions, "especially as the shock to sentiment/capital flows is likely to require higher risk premia from EMs".

While the extent of trade war pain remains unknown, monetary policy may have to do the heavy lifting in India, it added.

According to Ankita Pathak, Macro Strategist and Global Equities Fund Advisor at Ionic Asset by Angel One, the RBI is expected to cut interest rates by 25 basis points tomorrow, shifting its stance from neutral to accommodative.

"India is relatively better than the rest of Asia in terms of tariffs, but it is unlikely to be immune to the effects of a global slowdown. "China's response to Trump's tariffs will be critical for Asian central banks (including the Indian RBI) and will set the course for both currency and interest rates," Pathak stated.

Even before Trump's tariffs, India required monetary reflation to support growth, and the need for it, as well as the ability to do so, is now at its peak. It must therefore be achieved through both rate cuts and surplus liquidity maintenance, she stated.