RBI announces 25 bps interest rate cut

Key Highlights of RBI Monetary Policy- Stance changed to ‘Accommodative’

Reserve Bank of India (RBI) announced 25 bps interest rate cut and changed its neutral stance to accommodative. Repo Rate now stands at 6.00% vs 6.25% earlier.

CPI Inflation projection has been lowered to 4.0% from 4.2% for FY26. In Q1FY26, it expects inflation at 3.6%, Q2FY25 at 3.9%, 3.8% in Q3FY26 and 4.4% in Q4FY26.

GDP growth forecast for FY26 has been lowered to 6.5% from 6.7%. In Q1FY26, GDP is expected at 6.5%, 6.7% in Q2FY25, 6.6% in Q3FY26 and 6.3% in Q4FY26.

In terms of additional measures, RBI will be issuing guidelines with respect to co-lending and gold loans to tighten underwriting.

View: The overall outcome is on expected lines. Monetary policy committee (MPC) changed its stance to Accommodative from Neutral with 25 bps interest rate cut as downside risks to global growth is mounting amid global trade tariff war which may accentuate the weak domestic demand dynamic. Additionally, benign inflation outlook gives the RBI enough room to change stance and cut rates. Growth forecast has been lowered marginally as uncertainties remain high in the wake of recent spike in global volatility due to trade tariffs. On the positive side inflation forecast has been lowered. The outcome is positive for rate sensitive sector like- NBFCs, real estate, Auto & Infra however for banks, it would be slight negative as lower yields would drag margins partially supported by lower cost of funds. Overall, we retain our cautious view on market for 2025 and recommend a defensive portfolio in line with our cautious view of the market, with overweight on selective banks, NBFCs, capital goods, power, infra, domestic pharmaceuticals, telecom and FMCG.