RBI Monetary Policy: Consumption, financials to lead rally, says Gurmeet Chadha; another 25-bp cut expected

RBI Monetary Policy: The Reserve Bank of India’s 25 basis point rate cut to 5.25 per cent has drawn a strong positive reaction from market experts. Speaking exclusively with Anil Singhvi of Zee Business, Gurmeet Chadha, managing partner and fund manager at Complete Circle Consultants, said the policy supports financials, boosts sentiment, and may open the door for further easing.

‘A very constructive policy for financials’

Chadha said the tone of the policy clearly favours banking and financial stocks. He noted that transmission in loan rates has now reached about 64–65 paise, compared to around 50 per cent during the previous policy review. On the deposit side, he said transmission is almost complete, giving the RBI more room to cut rates going forward.

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He added that the proposed Rs 5 billion rupee–dollar swap announced by the central bank will need closer examination, as it could have some impact on the currency. “I will look at the notification to understand the details,” he said.

OMO announcement key for bond markets

Chadha highlighted the RBI’s plan for open market operations (OMOs) as an important signal, saying a softer 10-year G-sec yield is essential for a meaningful reduction in overall borrowing costs.

He reiterated his positive view on long-duration bonds. “This segment is in a sweet spot,” he said, adding that the RBI’s tone suggests room for at least one more 25 basis point cut ahead, given its 2 per cent inflation projection.

Growth outlook may surprise on the upside

Commenting on the RBI’s GDP projections, Chadha said the central bank’s 7 per cent estimate for Q1 could turn out to be conservative. “Growth could come in slightly better,” he noted, calling the overall policy constructive across all fronts.

Focus on consumption and rate-sensitive sectors

Chadha said spending is picking up, especially private consumption, which he viewed as a strong positive. He expects consumption-oriented sectors to play out better through the full festive and wedding season.

While consumption stocks have not rallied as much as expected post the GST cut—barring autos—he believes the coming weeks will reflect stronger demand trends.

He also remains overweight on financials and other rate-sensitive areas, saying the sector stands to benefit the most from the RBI’s stance.

Market reaction turns mixed after initial jump

Equities saw an initial surge after the rate decision, but some profit-booking followed. The Nifty is hovering around flat levels near 26,100, while Bank Nifty remains firm with gains of around 150 points.

RBI cuts repo rate to 5.25%

Earlier in the day, the RBI reduced the repo rate by 25 basis points to 5.25 per cent after the MPC’s three-day meeting. Governor Sanjay Malhotra said the decision followed a comprehensive review of macroeconomic conditions and was implemented with immediate effect.