Menu

repo rate

UGRO Capital Acquires Profectus Capital in Ambitious ₹1,400 Crore Deal

Contraction in Banking Stocks to around 6 percent due to RBI's repo rate cut

Contraction in Banking Stocks to around 6 percent due to RBI’s repo rate cut

 

Banking stocks witnessed a sharp downturn on Tuesday following the Reserve Bank of India’s (RBI) decision to decline the repo rate by 25 basis points, bringing it down to 6%. Though widely expected amid rising global trade tensions and slowing domestic growth, the rate cut triggered a broad selloff in financial sector stocks, mainly hitting public sector banks (PSBs) and gold loan-focused non-banking financial companies (NBFCs).

The RBI’s move, aimed at stimulating economic growth in the face of U.S.-imposed tariffs on Indian exports and global economic headwinds, raised concerns over net interest margins (NIMs) and asset quality pressures in the near term. The Nifty Bank index closed the day lower by 1.8%, with public sector banks accounting for the bulk of the drag.

 

Public Sector Banks Lead the Decline

Among the worst-hit stocks were the Bank of India, Union Bank of India, Indian Bank, and Bank of Baroda, which saw their share prices tumble by nearly 4% during the trading session. Investors reacted to fears that the interest rate cut would compress these banks’ margins at a time when credit demand remains tepid and deposit costs are sticky.

Despite possessing stronger asset quality metrics, other significant public sector banks, including Punjab National Bank, Canara Bank, and State Bank of India, also recorded declines in the 1.5% to 2% range. The selloff reflects broader concerns about profitability, especially for banks heavily reliant on interest income from fixed-rate lending.

“While the rate cut is positive from a macroeconomic perspective, it creates near-term pressure on banks’ spreads. This is particularly pronounced for PSBs, which have limited pricing flexibility and already operate with thin margins,” said Manisha Rao, a banking analyst at Vertex Capital.

 

Gold Loan NBFCs Under Pressure

Gold loan NBFCs such as Manappuram Finance and Muthoot Finance also suffered, dropping over 3.5% and 3.2%, respectively. These firms are susceptible to interest rate movements, and the cut is likely to increase competitive pressure from banks offering cheaper loan products, squeezing NBFC market share and profitability. The rate cut also raises concerns about evaluating gold collateral risk, especially if gold prices become volatile or customers opt for early repayments to refinance elsewhere at lower rates.

Moreover, falling interest rates may prompt a revaluation of gold collateral risk, especially if gold prices become volatile or customers opt for early repayments to refinance elsewhere at lower rates.

“Gold loan NBFCs face a dual challenge post the rate cut—competitive pressure from banks and rising risk to loan-to-value ratios if gold prices fluctuate,” noted Akhil Mehta, financial services strategist at EquiTrust.

 

Why Did the Rate Cut Trigger a Selloff?

Typically, rate cuts are seen as stimulative for equity markets, but the dynamics can be different in the banking sector, especially in the short term. Banks earn money from the spread between deposit and lending rates. While lending rates typically drop quickly in a rate-cut cycle, deposit rates remain higher for longer due to legacy liabilities and competitive pressures, leading to margin compression.

In addition, with the RBI also lowering India’s GDP growth forecast to 6.5%, investors worry that the demand for credit—especially from large corporates and MSMEs—may not pick up quickly enough to offset margin losses. As a result, earnings visibility becomes clouded, particularly for PSBs already under pressure from rising bond yields and modest loan book growth.

 

Private Sector Banks More Resilient

In contrast, private sector banks such as HDFC Bank, ICICI Bank, and Axis Bank were more resilient. While they also saw marginal losses, the declines were under 1%, reflecting their more substantial balance sheets, diversified income profiles, and better cost controls.

These banks are also better positioned to pass on rate changes swiftly due to their more agile retail operations and digital channels. This allows them to adjust lending and deposit rates faster than their public sector counterparts.

 

Outlook: Temporary Blip or Structural Concern?

Analysts are divided on whether the selloff in bank stocks is a short-term correction or indicative of longer-term structural concerns.

Some, like Neha Bajaj of Scripwise Investments, believe this is a “knee-jerk reaction” and expect sentiment to stabilize as lending picks up over the next two quarters. “A rate cut cycle typically leads to loan book expansion and lower credit costs in the medium term. The market might be overreacting to short-term margin compression.”

Others caution that banks could face a prolonged period of profitability pressure unless deposit rates ease and economic activity revives meaningfully, especially in sectors sensitive to global shocks and trade dynamics.

 

Conclusion

Banking stocks, particularly public sector lenders and gold loan NBFCs bore the brunt of investor anxiety over shrinking margins and uncertain credit growth.

As the monetary policy cycle enters a dovish phase, the performance of bank stocks will likely hinge on how effectively financial institutions manage interest rate transmission, balance sheet risks, and competitive dynamics in a softening economic environment.

.

The image added is for representation purposes only

Electric Ambitions: Hedge Funds Target Asia’s Energy Markets

 

 

 

RBI's Surprise Rate Cut Sends Realty Stocks Tumbling: Is It Time to Reassess?

RBI Maintains Neutral Stance: Balancing Inflation Risks and Growth Slowdown

RBI Maintains Neutral Stance: Balancing Inflation Risks and Growth Slowdown

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) extended its status quo on policy rates in its latest meeting, keeping the repo rate unchanged at 6.50%. The decision, supported by a majority vote of 4 out of 6 members, underscores the central bank’s cautious approach in managing inflation risks while ensuring sustained economic recovery. Notably, two members voted for a 25 basis points (bps) rate cut, reflecting concerns over the ongoing growth slowdown.

Inflation Concerns Shape Policy Decision
The RBI’s decision to maintain its neutral stance stems from an uptick in inflationary pressures. The central bank sharply revised its baseline Consumer Price Index (CPI) inflation forecast for Q3 FY25, raising it by 0.9 percentage points. Similarly, the full-year inflation forecast has been increased by 0.3 percentage points, highlighting persistent price pressures.

RBI Governor Shaktikanta Das reiterated the significance of price stability, emphasizing its role in supporting sustained growth. “High inflation adversely impacts consumption and investment activity,” he noted, signaling the MPC’s vigilance in managing inflation expectations. The October CPI print of over 6%—driven primarily by food inflation—further underscores the need for caution.

Revised Growth Projections Reflect Slowdown
Acknowledging weaker-than-expected economic performance in the first half of FY25, the RBI lowered its full-year GDP growth forecast from 7.2% to 6.6%. The second quarter witnessed a seven-quarter low in growth, prompting a recalibration of projections.

Despite this, the RBI projects a rebound in the latter half of FY25, with real GDP growth expected to rise to 7% in H2 FY25. Governor Das expressed confidence in the recovery, citing early signs of improvement in high-frequency indicators such as rural demand, government consumption, and external trade.

Liquidity Measures to Support Growth
In a move to address liquidity challenges, the RBI announced a 50 bps reduction in the Cash Reserve Ratio (CRR), bringing it down to 4% of banks’ net demand and time liabilities. This measure, last implemented in April 2022, is expected to inject approximately ₹1.16 trillion into the banking system.

This liquidity infusion aims to counter tightness arising from the RBI’s dollar sales to stabilize the rupee. Current estimates suggest a durable liquidity surplus of ₹1.88 trillion, significantly lower than the ₹4.88 trillion recorded in early October.

The CRR cut complements other liquidity-enhancing measures, such as raising the ceiling rate on Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits by 1.5% above the reference rate until March 2025. This move seeks to attract higher capital inflows amidst declining foreign portfolio investments (FPIs) and net foreign direct investments (FDIs).

Inflation and Growth Outlook
Inflation Trajectory:
The RBI’s revised inflation projections signal a cautious outlook. Headline inflation is expected to average 5.7% in Q3 FY25, up from the previous estimate of 4.8%. Over the subsequent two quarters, inflation is projected to moderate to 4.55%, before aligning with the RBI’s 4% target in Q2 FY26.

Food inflation, a key driver, is anticipated to ease with the arrival of the winter crop and improved supply chain dynamics. However, the potential for second-round effects from elevated food prices remains a concern. Surveys indicate that input and selling prices could firm up in Q4, necessitating close monitoring of inflation data in the coming months.

Growth Prospects:
Despite the downward revision in growth forecasts, the RBI remains optimistic about a recovery. Factors supporting this outlook include robust Kharif production, favorable Rabi crop prospects, and an uptick in investment activity.

High capacity utilization in the private manufacturing sector and the government’s fiscal space for increased capital expenditure are expected to bolster growth. Additionally, resilient global trade and buoyant services demand are likely to sustain external and urban consumption, although geopolitical and geo-economic uncertainties pose risks.

Policy Implications and the Road Ahead
The MPC’s cautious approach suggests that policy easing in the February 2025 meeting will hinge on inflation and growth dynamics. With inflation projected to remain above the 4% target until mid-2025, any rate cuts will depend on a durable reduction in price pressures.

The infusion of durable liquidity through the CRR cut provides the RBI with the flexibility to monitor macroeconomic conditions. Financial conditions remain supportive, as evidenced by strong bank credit growth surpassing nominal GDP growth and robust credit deployment across key sectors.

The National Statistical Office (NSO) will release advance GDP estimates before the next MPC meeting, offering critical insights into underlying economic momentum. While the baseline trajectory suggests room for a cumulative 50 bps rate cut under a neutral stance, persistent inflationary pressures could delay monetary easing. Conversely, if growth underwhelms, the MPC may adopt an accommodative stance, potentially enabling up to 100 bps of rate cuts over the next year.

Conclusion
The RBI’s latest policy decision reflects a balanced approach, prioritizing inflation management while addressing growth concerns. By maintaining a neutral stance and implementing targeted liquidity measures, the central bank aims to navigate a challenging macroeconomic landscape. The trajectory of inflation and growth in the coming months will be crucial in determining the MPC’s future course of action. For now, the RBI’s cautious optimism provides a foundation for sustaining economic recovery amidst global uncertainties.

The image added is for representation purposes only

TCS Unveils Pace Studio in Philippines to Boost Digital Innovation

Sensex Jumps 450 Points Amid Renewed US-China Trade Hopes and Strong Sectoral Buying

RBI Shifts to Neutral Stance: What This Means for Indian Equities

RBI Shifts to Neutral Stance: What This Means for Indian Equities

This week, the Reserve Bank of India (RBI) took a significant step in adjusting its monetary policy. After holding interest rates steady at elevated levels for 20 months and maintaining its stance of “withdrawal of accommodation,” the latest Monetary Policy Committee (MPC) meeting has shifted the stance to “neutral.” This signals a potential change in the central bank’s future approach, hinting at possible rate cuts on the horizon.

Factors Behind the Shift
The RBI retained its FY25 forecasts for GDP and CPI inflation at 7.2% and 4.5%, respectively. However, the GDP estimate for the September quarter was slightly reduced from 7.2% to 7%, while subsequent quarters are projected to see better performance. CPI inflation for Q2 is also expected to come in at 4.1%, lower than the previously estimated 4.4%.

This slight reduction in growth and inflation estimates reflects the economy’s softer-than-expected performance. High-frequency indicators such as passenger vehicle sales and the manufacturing Purchasing Managers’ Index (PMI) also hint at a slowdown. As a result, the RBI deemed it appropriate to shift its stance to “neutral,” preparing for future rate cuts that could support growth in line with revised projections.

Despite this shift, the RBI has kept its policy rate unchanged, emphasizing its commitment to bringing inflation down to 4%. The central bank cited risks from weather disruptions, geopolitical tensions, and global inflationary pressures, keeping them cautious.

This change follows the U.S. Federal Reserve’s recent rate cut, underscoring the importance of maintaining attractive yield spreads between Indian and U.S. treasuries, which influences foreign investor behavior.

Implications for Indian Equities
A shift to a neutral stance lays the groundwork for the RBI to initiate rate cuts, likely before the end of the year. Lower rates should theoretically boost borrowing and spending, fueling economic growth and potentially lifting the stock market. However, in practice, rate cuts are often accompanied by stock market corrections, due to delayed transmission effects and liquidity constraints.

Globally, rapid rate hikes by central banks, including the U.S. Fed and RBI, have led to a narrowing of yield spreads between U.S. and Indian bonds. This resulted in foreign institutional investor (FII) outflows from Indian equities, totaling over Rs. 4 lakh crore. Although the U.S. Fed’s rate cut temporarily widened yield spreads, an RBI rate cut might halt this trend and encourage further FII outflows, especially as China’s economic stimulus continues to divert investment away from India.

What Should Investors Do?
Despite significant FII outflows, Indian equities have shown resilience, largely due to strong domestic institutional investor (DII) support. DIIs have injected nearly Rs. 8 lakh crore into the market, pushing indices to record highs. Behind this are retail investors, whose enthusiasm for stock markets has risen recently, often at market highs. The key question is whether these investors will stay invested through market corrections.

India’s long-term growth prospects remain solid, and any short-term market dips could present opportunities for investors to buy into fundamentally strong companies at more favorable valuations. While near-term volatility might persist, the broader outlook for Indian equities remains positive.

The image added is for representation purposes only

TCS Unveils Pace Studio in Philippines to Boost Digital Innovation

RBI's Surprise Rate Cut Sends Realty Stocks Tumbling: Is It Time to Reassess?

RBI Signals Shift to Neutral Stance, Market Anticipates Rate Cut

RBI Signals Shift to Neutral Stance, Market Anticipates Rate Cut

The Reserve Bank of India (RBI) has taken a pivotal step in monetary policy by shifting its stance from “withdrawal of accommodation” to a more neutral position. This move, announced following the latest meeting of the Monetary Policy Committee (MPC), opens the door for potential rate cuts if inflation remains within a favorable trajectory. For months, the central bank had been in tightening mode, focused on reining in inflation. With the latest inflation print of 3.7% in August, comfortably below the 4% target, markets are already anticipating a rate cut in December. But as the RBI takes this cautious approach, a deeper examination reveals that several risks still loom large.

Stance Shift: A Prelude to Rate Cuts?
The change in stance signals the central bank’s readiness to shift gears in response to evolving macroeconomic conditions. By adopting a neutral stance, the RBI is essentially indicating that it is no longer in a mode of withdrawing liquidity but stands prepared to act as necessary to sustain growth and keep inflation in check. This is a marked change from its previous focus, where containing inflation at any cost was the top priority.

The markets have taken this as a strong signal, with expectations now leaning toward a rate cut as early as the December meeting. Bond yields have eased, and equity markets have welcomed the news, buoyed by the prospect of cheaper capital and a more accommodative monetary policy.

However, the key question is not just whether the RBI will cut rates, but how aggressive it will be in doing so. Some market participants are already wondering if this could lead to a series of rate reductions, or whether the central bank will adopt a more cautious approach. The decision will likely depend on a host of factors, both domestic and global.

Governor Das Flags Key Risks
Despite the markets’ optimism, RBI Governor Shaktikanta Das was quick to temper expectations. In his policy statement, he highlighted significant risks that could derail the inflation trajectory. “Even as there is greater confidence in navigating the last mile of disinflation, significant risks – I repeat, significant risks – to inflation from adverse weather events, accentuating geopolitical conflicts, and the very recent increase in certain commodity prices continue to stare at us,” Das warned.

The governor’s caution stems from a series of unpredictable factors that could easily upset the RBI’s inflation outlook. Geopolitical tensions, particularly in the Middle East, pose a major concern. The conflict between Israel and Iran has caused a surge in crude oil prices, which recently crossed $80 per barrel. For a net importer like India, rising crude prices could stoke domestic inflation, making it more difficult for the RBI to ease monetary policy without jeopardizing price stability.

Additionally, adverse weather events, such as prolonged heat waves and erratic monsoon rainfall, have impacted agricultural output. While the RBI expects a robust kharif and rabi harvest, there is always the possibility that unpredictable weather conditions could disrupt supply chains and drive up food prices, a key component of headline inflation in India.

Balancing Growth and Inflation
The RBI’s decision to keep its inflation and growth projections unchanged reflects its delicate balancing act. The central bank expects GDP growth for FY25 to hold steady at 7.2%, driven largely by strong investment activity. Governor Das noted that both consumer confidence and business sentiment are on the rise, with private investments playing a pivotal role in boosting the country’s economic prospects.

While the outlook for growth remains positive, the RBI is aware that risks to inflation could quickly derail progress. Das’s analogy of inflation being akin to a “horse brought to the stable” illustrates the central bank’s cautious stance. “We have to be very careful about opening the gate as the horse may simply bolt again. We must keep the horse under tight leash, so that we do not lose control,” Das said, emphasizing the need for vigilance.

Rate Cut Expectations: Cautious Optimism
While one of the MPC’s external members voted for an immediate rate cut, the overall tone of the committee remains cautious. Many analysts believe that even if the RBI does initiate a rate-cutting cycle, it will likely be shallow and gradual, with the first cut possibly in December or early next year. Much will depend on how global commodity prices and domestic inflation evolve in the coming months.

Upside risks, such as crude oil price shocks, geopolitical tensions, and weather disruptions, remain largely outside the control of the RBI. As a result, any rate cut is likely to be reactionary rather than preemptive, with the central bank taking a wait-and-see approach before committing to deeper monetary easing.

Conclusion
The RBI’s shift to a neutral stance has generated excitement in the markets, with expectations of an upcoming rate cut in December. However, the central bank is navigating a complex landscape of inflationary risks and external uncertainties. While growth prospects remain solid, the RBI is unlikely to aggressively cut rates, opting instead for a more measured approach to ensure that inflation remains under control. Governor Das’s message is clear: while the door to rate cuts is now open, the central bank will tread carefully to avoid upsetting the balance between growth and inflation.

The image added is for representation purposes only

TCS Unveils Pace Studio in Philippines to Boost Digital Innovation

RBI's Surprise Rate Cut Sends Realty Stocks Tumbling: Is It Time to Reassess?

RBI’s October MPC: Rate Status Quo Likely Amid Persistent Inflation Concerns, Global Risks

RBI’s October MPC: Rate Status Quo Likely Amid Persistent Inflation Concerns, Global Risks

India’s Monetary Policy Committee (MPC) is set to reconvene this week, marking the first meeting for its three new external members: Ram Singh (Director, Delhi School of Economics), Saugata Bhattacharya (veteran economist), and Nagesh Kumar (Director, Institute for Studies in Industrial Development). Given their fresh appointments, all three are expected to follow the Reserve Bank of India’s (RBI) house view on rates, at least initially, as noted in a recent Bank of America report. While the new members lack any known rate biases, newcomers traditionally adopt the majority stance in their early days.

This is significant because it suggests that the RBI is likely to maintain the status quo on rates for the tenth consecutive policy meeting. This pattern aligns with Governor Shaktikanta Das’ cautious stance, particularly on inflation, which remains a key concern for the central bank’s policymakers.

Despite headline inflation falling below the RBI’s medium-term target of 4%—with CPI inflation at 3.65% in August, slightly up from July’s 3.6%—the central bank continues to exercise caution. The RBI’s reluctance to declare victory over inflation stems largely from persistent food price pressures. Governor Das, in the minutes of the August MPC meeting, underscored that while the base effect has helped lower headline inflation, food prices continue to pose challenges, and inflation expectations among households are rising. Therefore, monetary policy needs to remain vigilant to the risk of food price pressures spilling over into core inflation.

Adding to these inflationary concerns are risks posed by the geopolitical tensions in the Middle East. India is one of the world’s largest importers of crude oil, and escalating conflict in the region, particularly between Israel and Iran, could disrupt oil supplies and send prices skyrocketing. This could increase India’s oil import bill, which would, in turn, fuel inflation. Although crude oil is currently trading below the RBI’s assumed $85 per barrel average for FY25, any significant upward movement could complicate the inflation outlook. The central bank will undoubtedly factor this geopolitical risk into its deliberations.

Inflation is not the only concern for the MPC, however. Economic growth, while improving, remains below potential. Although India’s economy has shown some signs of recovery, unemployment continues to rise, and small businesses are grappling with high borrowing costs. Small and medium-sized enterprises (SMEs), in particular, are struggling with rising interest payments, and there are growing concerns about asset quality in the SME sector. In light of these challenges, there is a strong case for the RBI to begin cutting interest rates to stimulate growth.

The RBI, however, faces a dilemma. On the one hand, inflation pressures, especially in food and core inflation, suggest the need for a cautious approach to rate cuts. On the other hand, the economic reality on the ground—rising unemployment, underwhelming growth, and financial strain among small businesses—argues for the central bank to shift its focus toward supporting growth.

The recent 50 basis point (bps) rate cut by the US Federal Reserve will also be a topic of discussion at the upcoming meeting. While the RBI Governor has consistently maintained that the Fed’s actions do not dictate India’s rate policy, the reality is that central banks around the world, including India’s, cannot fully ignore rate moves in major economies like the US. The Fed’s rate cut may influence the MPC’s thinking, particularly if global economic conditions continue to weaken.

In summary, while the October meeting is likely to result in a rate status quo, the groundwork is being laid for a potential rate cut in the next few months. With inflation pressures still present but stabilizing, and economic growth faltering, the RBI will likely need to pivot toward growth support soon. However, much will depend on how inflation, particularly food prices, evolves in the coming months, and how global risks, such as the Middle East conflict and US monetary policy, unfold. If inflationary pressures subside, a rate cut could be on the horizon by the end of the year.

The image added is for representation purposes only

TCS Unveils Pace Studio in Philippines to Boost Digital Innovation

RBI's Surprise Rate Cut Sends Realty Stocks Tumbling: Is It Time to Reassess?

Policy watch: RBI holds rates, Moderates growth forecast for 2024

Policy watch: RBI holds rates, Moderates growth forecast for 2024
Introduction:

The Reserve Bank of India (RBI) has concluded its latest monetary policy review with a cautious yet optimistic stance as the country prepares to welcome the New Year. The central bank, while remaining vigilant to emerging economic challenges, has taken steps to support growth and maintain stability in the financial system. This report provides an overview of the key highlights from the recent RBI policy announcement and analyses the potential implications for the Indian economy in the coming year.

As the global economic landscape continues to evolve amid ongoing uncertainties, central banks play a crucial role in shaping monetary policies that balance growth objectives with inflation control. The RBI, in its recent policy review, has demonstrated a nuanced approach that seeks to address the challenges faced by the Indian economy while fostering a positive outlook for the upcoming year.

Key Highlights of the RBI Policy:

 Repo Rate Unchanged at 5.9%: The RBI has decided to keep the repo rate unchanged at 5.9%, signalling a steady approach to monetary policy. This move aims to provide stability to the financial markets while supporting economic recovery.
 Policy Stance remains “Withdrawal of Accommodation”: The central bank has maintained its policy stance, signalling a commitment to gradually withdrawing accommodative measures. This decision suggests a cautious approach, balancing the need for economic support with concerns about potential inflationary pressures.
 Inflation Projected to Moderate to 4% in Q4 FY24: The RBI’s inflation outlook anticipates a moderation to 4% in the fourth quarter of the fiscal year 2023-24. This projection reflects the central bank’s attention to inflation dynamics and its efforts to ensure price stability in the economy.
 Growth Forecast Revised Downward to 6.8% for FY24: In response to evolving economic conditions, the RBI has revised its growth forecast downward to 6.8% for the fiscal year 2023-24. This adjustment acknowledges the challenges faced by the economy while providing transparency about the central bank’s expectations.
 Focus on Maintaining Financial Stability: The policy highlights underscore the RBI’s commitment to maintaining financial stability. This includes efforts to strengthen regulatory frameworks, enhance risk management practices, and ensure the resilience of the financial system in the face of potential disruptions.
 RBI to Remain Vigilant and Monitor Evolving Economic Situation: The central bank has reiterated its commitment to vigilance, emphasizing its role in closely monitoring the evolving economic situation. This proactive stance indicates a readiness to respond to changing conditions, ensuring that policy measures remain adaptable to emerging challenges.

Market Reaction:

The Indian stock market initially reacted positively to the policy announcement, with the benchmark BSE Sensex index rising over 2%. However, the gains were short-lived, and the market ended the day flat.

RBI’s Stance on Liquidity and Market Impact:

Despite refraining from introducing fresh liquidity measures, the Reserve Bank of India (RBI) has emphasized its agility in liquidity management and maintained the possibility of utilizing policy tools like Open Market Operations (OMO) Sales. The absence of unexpected announcements led to a firming of the 10-year sovereign bond yield, reaching 7.26%, while the equity markets closed just below the 21,000 marks.

The central bank’s decision to hold off on new liquidity measures signals a measured approach, suggesting a current satisfaction with prevailing market conditions. However, the emphasis on nimble liquidity management underscores the RBI’s preparedness to adapt to changing economic circumstances. The mention of OMO Sales being “not off the table” implies that the central bank retains flexibility, ready to deploy additional measures when warranted.

The market response was notable, with the 10-year sovereign bond yield experiencing upward pressure, indicating a revaluation by investors in light of the absence of immediate liquidity injections. Concurrently, equity markets closed marginally below 21,000, reflecting a cautious sentiment among market participants. The reactions suggest that investors are carefully assessing the implications of the RBI’s decision and its potential impact on economic and market conditions.

Conclusion:

In conclusion, the RBI’s recent monetary policy review strikes a careful balance between supporting economic recovery and addressing inflation concerns. Maintaining the repo rate at 5.9% provides stability, while the decision to withdraw accommodative measures reflects a cautious approach. The downward revision of the growth forecast to 6.8% acknowledges economic challenges.
Market reactions indicate investor scrutiny, with a brief surge followed by a flat close. The RBI’s commitment to financial stability and its readiness to deploy liquidity measures position the economy for resilience. As India enters the New Year, the central bank’s nuanced stance sets the stage for stability and growth amid evolving economic conditions.

The image added is for representation purposes only

 

RBI Charts Course for Sustainable Growth: Inflation Control as the Key

Will RBI give the liquidity push economy needs? 25 BPS cut on the cards.

Will RBI give the liquidity push economy needs? 25 BPS cut on the cards.

Three times in a row, will the Reserve Bank of India (RBI) cut the rates once again? Probably yes. RBI is supposed to release the bi-monthly monetary policy on 6th...
Maruti Suzuki, Hyundai: Driving Export Growth in FY26!

RBI cuts Repo rate by 25 BPS to 6 percent

The First Bi-Monthly policy held on April 4, 2019, by the Monetary Policy Committee (MPC) of the Reserve Bank of India cut the repo rate under the Liquidity Adjustment Facility...
Factory and Industrial Output Face Slowdowns

Factory and Industrial Output Face Slowdowns

Owing to the recent spike in food and oil prices, India’s factory growth slowed down and retail inflation saw a rise. Retail inflation rose from 2.05% last month to a...