Cooling inflation reinforces case for potential RBI rate cuts
India’s inflation fell to 4.31 per cent in January from 5.22 per cent, approaching the RBI’s 4 per cent target after four months above 5 per cent and this trend reinforces the case for potential rate cuts, with the repo rate at 6.25 per cent, a new report showed on Saturday.
The observed market trajectory suggests a cautious sentiment among investors, potentially influenced by macroeconomic conditions, sector-specific developments, and global financial market trends, according to the Motilal Oswal Mutual Fund report.
The Nifty 500 Index declined by 7.88 per cent in February, reflecting contractions across multiple sectors. Factor-based strategies reflected broader market movement, while fixed-income instruments, including Nifty 5 year Benchmark G-Sec (+0.53 per cent), exhibited relative stability.
Globally, developed markets displayed mixed movements, where Switzerland (+3.47 per cent) and United Kingdom (+3.08 per cent) registered gains, while Japan (-1.38 per cent) showed a contraction, the report mentioned.
The US CPI inflation stood at 3 per cent, reflecting marginal increase from 2.90 per cent in the prior month.
Another HSBC report mentioned that India's long-term outlook remains strong and the investment cycle is projected to be on a medium-term uptrend supported by government investment in infrastructure and manufacturing, pickup in private investments, and a recovery in the real estate cycle.
The HSBC Mutual Fund’s ‘Market Outlook Report 2025’ expects higher private investments in renewable energy and related supply chains, localisation of higher-end technology components, and India becoming a more meaningful part of global supply chains to support faster growth.
The real economy, as of now, has evinced resilience to global developments.
“Basis the growth-inflation numbers, the MPC’s last policy action as well as the MPC minutes, we believe the RBI-MPC would deliver another 25 bps cut at its April policy while continuing to stay nimble and flexible on its liquidity strategy," the report projected.
For a third rate cut, inflation trajectory, monsoon outlook and global developments will possibly be key inputs going into the June policy meeting
