India’s equity market is trading higher on Wednesday morning after eight consecutive sessions of losses following the outcome of the latest RBI Monetary Policy Committee (MPC) meeting. The Reserve Bank of India's (RBI's) MPC has kept the repo rate unchanged at 5.5% with Governor Sanjay Malhotra announcing that the MPC has increased the growth forecast for the financial year 2025-26 to 6.8% from the earlier 6.5%.
The Nifty 50 was up 0.75% to hit intraday highs of 24,797 and the BSE Sensex gained over .80% to 80,900 level at 11.57 am. Shares of private banking companies such as HDFC Bank, ICICI Bank and Kotak Mahindra are trading with solid gains.
“The MPC delivered exactly a “dovish pause” which the market expected. But despite the policy being in tune with market expectations, the market has given a thumps up to the policy since the Central bank delivered some unexpected pro-market initiatives like allowing banks to fund acquisitions and also further liberalising loan against shares,” said V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.
He added, “Raising the GDP FY26 forecast to 6.8% from 6.5% earlier and lowering the FY26 CPI inflation forecast to 2.6% from 3.1% earlier reflect the Central bank’s optimism about the resilient economic outlook. The Governor’s comments indicate the possibility of one more rate cut; but it will depend on the incoming data and evolving outlook.”
India’s equity market closed in the red for the eighth straight session on Tuesday amidst mixed global cues and cautiousness ahead of the RBI’s MPC decision on Wednesday. The BSE Sensex and NSE Nifty declined more than 3% each during this period.
FII selling, coupled with fresh tariffs on Indian goods and a punitive hike in H-1B visa fees by the United States has rattled sentiment and triggered one of the steepest market declines of 2025.
Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS said that the RBI’s decision to keep the repo rate unchanged was in line with our expectations. He added the the recent GST rate rationalisation comes at an opportune time and is expected to support consumption demand during the festive season. However, one should remain watchful of the impact of external headwinds to growth from the US tariffs, which could partially offset the positive impact of the GST cuts.
“For banks, Q2 is expected to be another soft quarter, with tepid growth, NIM pressures, weaker treasury performance sequentially and higher credit costs. Banks are yet to see a meaningful recovery in credit growth, which is expected from H2 onwards. We expect NIMs to bottom out in Q2, so far. H2 margins should find support from deposit repricing and the CRR cut. Banks are seeing green shoots in terms of asset quality metrics and expect better outcomes from H2 onwards. We believe valuations for most banks are comfortable and clarity on pick-up in growth and improving asset quality metrics would warrant upside in banking stocks. We currently prefer HDFC Bank, Kotak Bank, SBI and Federal Bank,” stated Kulkarni.
Vijay Gour, Research Analyst at Mirae Asset Sharekhan also said that policy decision was in line with market expectations and underscores the RBI’s prudent strategy to allow the full transmission of earlier measures to take effect. Additionally, the RBI appears to be adopting a wait-and-watch approach to carefully assess global and tariff-related developments before making any future adjustments, added Gour.
Chanchal Agarwal, CIO Equirus Family Office said that the RBI Governor delivered a dovish pause, broadly in line with market expectations, signalling room for further accommodation should the headline inflation numbers be higher.
“A key positive development is the liberalisation of capital market lending norms. RBI raised prudential limits on loans against shares, financing against listed debt, IPO funding, and also allowed banks greater flexibility to extend credit for acquisition financing. This move is significant, as it enables banks to recapture flows that had increasingly shifted to structured credit players.In addition, policy thrust remained on widening credit intermediation – notably through measures permitting the expansion of Urban Cooperative Banks – aligning with the broader Viksit Bharat agenda of improving credit access and deepening the financial system,” added Agarwal.