RBI policy ‘neutral to positive’: How will repo rate pause and GDP cut impact Nifty and Sensex? Experts weigh in

The Reserve Bank of India (RBI) monetary policy is seen as “neutral to positive” for markets, with experts saying the stance supports liquidity and banking stocks, while concerns remain on growth and inflation outlook.

Market participants said the policy outcome was largely in line with expectations and did not bring any major surprise. Market expert Ajay Bagga said the central bank maintained continuity in its approach.

“Policy is as per expectations. Markets like certainty, and this reduces uncertainty at a time when geopolitical risks are already easing,” he said. He added that measures to manage currency volatility and steps to deepen money markets are positive signals for investors.

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Neutral to positive view for markets

Market expert Gurmeet Chadha described the policy as “neutral to positive” for equities. “Policy is neutral to positive. One good thing is the strong emphasis on liquidity, which is over Rs 2 lakh crore,” he said.

Chadha said strong liquidity conditions provide comfort to markets, especially during periods of global uncertainty.

Liquidity and credit growth remain strong

Experts highlighted that liquidity conditions remain supportive and credit growth continues to be steady. Chadha said credit growth at 14.3 per cent remains encouraging despite a challenging global environment.

He added that foreign institutional investor (FII) flows have had a significant impact on financial stocks, which remain a preferred sector for global investors.

Banking stocks may benefit

Experts said banking stocks are likely to benefit from the policy measures, particularly due to regulatory relief and liquidity support. Chadha pointed to the sharp movement in Bank Nifty as an indication of positive sentiment in the sector.

The Nifty Bank index was trading at 55,288.85 on Wednesday, registering a sharp gain of 2,572.60 points, or 4.88 per cent, during the day. Over the past five sessions, the banking index has risen by 3,521.20 points, or 6.80 per cent, indicating strong short-term momentum.

However, every month, the index remains down by 730.95 points, or 1.30 per cent, reflecting recent volatility. On a year-to-date basis, Nifty Bank has declined by 4,422.70 points, or 7.41 per cent.

“Financials have been impacted the most by FII flows, and that is why we are seeing strong moves in banking stocks,” he said. He added that relaxation in NPA provisioning norms and capital adequacy requirements could support banks’ earnings.

“There is some relaxation in NPA provisioning and capital norms. This can benefit banks, especially in a volatile environment,” he said.

Valuations attractive, earnings outlook stable

Chadha said valuations in the banking space remain reasonable and offer comfort to investors. “Valuations are attractive. Large banks are available close to two times book value, which is a good level,” he said.

He added that earnings growth for banks is expected to remain stable, supported by strong credit demand and improved balance sheets. He also highlighted that recent quarterly updates from banks showed double-digit credit growth.

Growth concerns and GDP outlook

Economist Atul Joshi flagged concerns over the growth outlook and noted inconsistencies in the RBI’s messaging. “They said rural and urban demand is strong, but at the same time flagged multiple risks to growth, including agriculture, weather and supply chain issues,” he said.

Joshi said the RBI has reduced GDP projections by around 20–30 basis points. He added that growth could slow further to around 6.3–6.4 per cent by the end of the year as the impact of global and domestic factors plays out.

Inflation, currency and future outlook

Experts said inflation risks remain a key concern going forward. Joshi said inflation has been revised upward and its impact may be visible over the next three to nine months.

On the currency, he said the RBI has maintained its stance of not targeting a specific exchange rate. “In the short term, the rupee may see some appreciation, but the overall depreciation trend towards 95 per dollar may continue,” he said.

Debt market expert Avnish Jain said the policy reflects a cautious approach amid global uncertainties. “Future policy decisions will depend on incoming inflation data and the impact of fuel price changes on the fiscal position,” he said.