Perspective on RBI MPC by Varun N Joshi, Investment manager on smallcase and Executive Director of GoalFi
Below the Perspective on RBI MPC by Varun N Joshi, Investment manager on smallcase and Executive Director of GoalFi
“What we're seeing from the RBI today is significant for all of us – whether you're managing a portfolio, running a business, or planning your investments. They've cut the repo rate by 25 basis points to 5.25%, announced Rs.1 lakh crore in bond purchases, and we're seeing yields come down. This is a clear signal that India has entered an easing cycle. But here's the important part – this isn't a free pass. Everything hinges on inflation staying around that 4% mark.What the RBI is attempting is a balancing act. They want to make borrowing cheaper, support economic growth, and keep financial markets stable – all while making sure inflation doesn't come roaring back after three years of keeping it in check. From an equity investment perspective, this changes things significantly. Lower rates and stable inflation typically mean investors are willing to pay higher valuations for quality companies – particularly banks, consumer businesses, and rate-sensitive sectors. But the key word here is 'quality'. This market will penalize weak companies with poor balance sheets. It's no longer about buying everything – you need to be selective. Our strategy is straightforward: own quality stocks and focus on companies with predictable earnings. The RBI has also raised the GDP growth forecast to 7.3% from 6.8%, which is encouraging news for corporate earnings. If inflation cooperates, we might see another rate cut next year, which would be further positive for equities. But if prices start rising again, this could be the end of the dovish phase.”
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