Quote on RBI Monetary Policy Announcement by Mr. Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS
Below the Quote on RBI Monetary Policy Announcement by Mr. Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS
“The Reserve Bank of India’s (RBI) decision to cut the repo rate by 25 basis points was largely anticipated. The RBI has maintained its ‘Neutral’ stance and revised its inflation forecast for FY26 down to 2%, from the previous forecast of 2.6%, largely due to lower food inflation. The growth forecast has been revised upwards for the year to 7.3%, up from 6.8%, following strong performance in Q2. For banks, Q2 delivered some margin related surprises, with many banks reporting an earlier-than-expected recovery even after absorbing the full impact of the 50 bps rate cut in June 2025. With the latest 25 bps cut, we expect the effect on NIMs to remain manageable and limited, taking cues from banks’ performance during the 100 bps rate reduction implemented by the regulator between Feb to June 2025. We anticipate that the impact of CRR cuts and ongoing TD repricing will offset the yield pressure arising from the recent rate cut. On the growth front, the latest data indicates revival in credit growth momentum, supported by improved consumption demand. Thus far, credit growth has been driven by the retail segment, with banks continuing to remain selective on the corporate side; we expect stronger growth delivery in H2. Asset quality concerns appear to be easing, with the unsecured segment showing better trends, which should sustain, driving credit costs lower. Despite the rate cut, we continue to believe the earnings-downgrade cycle is now behind and expect earnings growth to improve from here on.”
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