RBI Repo Rate Unchanged: The Reserve Bank of India on Wednesday kept the benchmark repo rate unchanged at 5.5 per cent, as the Monetary Policy Committee struck a balanced tone between softening inflation and resilient economic growth. The decision unanimously backed by all six MPC members was widely expected, though the central bank’s lowered inflation forecast and cautious growth optimism set the tone for markets and currencies alike.
Governor Sanjay Malhotra, speaking after the policy announcement, reiterated the central bank’s ‘neutral’ stance, signalling flexibility in future moves. “We continue to see encouraging momentum in domestic activity, though external headwinds remain,” he said, citing ongoing global trade uncertainties and capital flow volatility.
In response, the equity markets moved lower. The BSE Sensex dropped 116 points, closing near 80,600, while the Nifty50 lost 50 points to end at 24,600. Broader market sentiment skewed bearish particularly in the small-cap space, where the Nifty Smallcap100 declined 1.07 per cent, dragged down by names like Reliance Power, Kaynes Technology, and PG Electroplast, each down over 4 per cent.
Rupee Strengthens, Bond Yields Edge Higher
While equities faltered, the Indian rupee gained 10 paise, trading at 87.70 to the dollar as per Bloomberg data. Meanwhile, bond yields rose modestly, with the 10-year benchmark yield up 3 basis points, reflecting market digestion of a slightly dovish inflation outlook but no near-term shift in policy direction.
Growth Estimates Held, Inflation Lowered
The RBI kept its real GDP growth forecast unchanged at 6.5 per cent for FY26. Quarterly projections stood at 6.5 per cent for Q1, 6.7 per cent in Q2, 6.6 per cent in Q3, and 6.3 per cent in Q4, with Q1 FY27 seen at 6.6 per cent.
On inflation, the RBI made a noteworthy revision. The FY26 CPI inflation estimate was cut to 3.1 per cent from the earlier 3.7 per cent. Quarterly expectations were also eased: 2.1 per cent in Q2, 3.1 per cent in Q3, and 4.4 per cent in Q4, with Q1 FY27 at 4.9 per cent.
The Governor noted that while the near-term price environment appears benign — partly due to a favourable base — demand-led pressures could nudge inflation higher towards the end of the fiscal.
Liquidity Measures, External Position
The central bank also announced a CRR cut effective September, aimed at supporting liquidity conditions and transmission of past rate actions. “We will remain nimble and flexible in liquidity management,” Malhotra said, adding that comfortable liquidity has reinforced policy effectiveness in recent quarters.
On the external front, the RBI projected that the Current Account Deficit will remain sustainable, with forex reserves at $688.9 billion, covering more than 11 months of merchandise imports. The Governor acknowledged net FPI outflows, largely driven by the debt segment, but said the overall balance-of-payments position remains healthy.
Real Estate Sector Under Pressure
Outside of financial markets, concerns continue to mount in the real estate sector. According to data from ANAROCK Group, housing sales fell 20 per cent year-on-year in the June quarter, with only 96,285 units sold, compared to over 120,000 units in the same period last year.
Chairman Anuj Puri said that while the RBI’s pause in rates may offer temporary relief, the sector — particularly the affordable housing segment — remains exposed to external stress, including Trump-era tariff announcements and broader demand uncertainty. Also, average residential prices in the metro cities has gotten up by 39 per cent in the past two years, adding to affordability concerns.
