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Below the Perspective on RBI MPC announcement by Narender Singh, smallcase Manager and Founder at Growth Investing 

“RBI's decision to cut the repo rate by 50 basis points to 5.5% and shift its policy stance to Neutral reflects a pragmatic and sustainable approach to strengthen economic growth post a favorable inflation trajectory. This is the third consecutive rate cut, bringing cumulative reductions in 2025 to 125 basis points. It indicates the central bank's focus on reviving domestic demand and investment.”

Key Impacts:

* Consumption Rebound and Credit Growth: India’s private consumption, which contributes higher than 50% to GDP, is expected to gain momentum as lower rates improve disposable incomes and consumer spending. on Credit side, Banking credit grew by 16% YoY in April 2025, and this easing of rates is expected to further accelerate credit demand, particularly in retail and SME segments.

* Sectors benefiting with Rate cut remains primarily Real Estate & Housing Finance, Automobiles amd Infrastructure. Lower borrowing costs should revive real estate demand, particularly in affordable and mid-income housing. Housing loan rates are expected to fall below 8%, their lowest in over five years. Similarly with financing accounting for 80-85% of auto purchases, a rate cut is likely to provide a strong tailwind, especially for EVs and entry-level vehicles. On Infrastructure side Easier access to capital can boost infrastructure projects, aligning with the government's increased capital expenditure of ?10 lakh crore in FY26.

* The 10-year G-Sec yield fell by 15 basis points post-announcement, reflecting positive sentiment. This offers attractive opportunities for bond investors in the near term.

* On Macro front, Inflation has moderated to 3.8% in April 2025, staying within the RBI’s comfort zone. The downward revision of FY26 inflation projections to 3.7% indicates room for further easing if required.

* Considering Risks at the global front, uncertainties like U.S. monetary policy tightening, Conflict at Russia Ukraine front  and Oil price volatility remain potential headwinds.

* At Growth Investing , we see opportunities across rate-sensitive sectors such as housing finance, autos, and select mid-cap stocks in consumption-driven industries. Additionally, in fixed income, shorter-duration funds appear well-positioned for a falling rate environment, while a focus on high-quality corporate bonds could offer stable returns.

* Our strategy remains to balance growth-oriented opportunities with prudent risk management, ensuring long-term value for our clients.

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