RBI keeps repurchase rate unchanged to 5.5%; maintains a “neutral” policy stance
The Reserve Bank of India’s storage rate remains unchanged: The Reserve Bank of India held the benchmark repurchase rate unchanged at 5.5% on Wednesday as the Monetary Policy Committee hit a balanced tone between softening inflation and elastic economic growth. Although central bank lowered inflation forecasts and cautious growth optimism have brought the tone to markets and currencies, all six MPC members unanimously supported the decision.
Governor Sanjay Malhotra, speaking after the policy announcement, reaffirmed the central bank’s “neutral” position, which demonstrates the flexibility of future action. “Although external headwinds remain, we continue to see inspiring domestic activity momentum,” he said.
In response, the stock market moved lower. The BSE Sensex fell 116 points to close to 80,600, while the Nifty50 lost 50 points to 24,600. The broader market sentiment is leaning towards bearishness, especially in the small-cap space, with the Nifty SmallCap100 falling 1.07%, dragged by names like Reliance Power, Kaynes Technology and PG electromagnets, each falling by more than 4%.
Rupee strengthens, bonds produce higher edge
Despite the stock’s staggering pace, the Indian Rupee received 10 Paces, at $87.70 according to Bloomberg data. At the same time, bond yields rose moderately, with the 10-year benchmark yield rising by 3 basis points, reflecting the market’s slightly dirty inflation prospects, but the policy direction has not changed recently.
Growth estimates, inflation decreases
The Reserve Bank of India keeps its real GDP growth forecast at 6.5% in FY26. Quarterly forecasts are 6.5% in Q1, 6.7% in Q2, 6.6% in Q3, 6.3% in Q4, and 6.6% in Q27.
Regarding inflation, the Reserve Bank of India has made noteworthy revisions. The CPI inflation estimate for FY26 was reduced by 3.1% from an earlier 3.7%. Quarterly expectations were also alleviated: 2.1% in the second quarter, 3.1% in the third quarter, 4.4% in the fourth quarter, and 4.9% in the fiscal year 27 of the first quarter.
The governor noted that while the near-term price environment appears to be benign – partly due to a fundamentally good foundation, demand-led pressures may drive higher inflation by the end of the fiscal year.
Liquidity measures, external location
The central bank also announced CRR cuts in September, aiming to support the spread of liquidity conditions and past interest rate actions. “We will maintain flexibility and flexibility in liquidity management,” Mahotra said, adding that comfortable liquidity has enhanced policy effectiveness in recent quarters.
On the external side, the Reserve Bank of India expects the current account deficit to remain sustainable, with foreign exchange reserves of US$688.9 billion covering commodity imports over 11 months. The governor acknowledged that the net outflow of FPI, which was largely driven by the debt sector, but said the positions on the total paid were still healthy.
Real Estate Department
Outside the financial market, concerns continue to continue to the real estate sector. Housing sales in the June quarter fell 20% year-on-year, with only 96,285 units sold, compared with more than 120,000 units a year ago, according to Anarock Group.
Chairman Anuj Puri said that while the RBI pause could provide temporary relief, the industry, especially the affordable housing sector, is under external pressure, including Trump-era tariff announcements and broader demand uncertainty. In addition, the average residential price in metropolitan cities has risen by 39% over the past two years, which increases the issue of affordability.
