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Below the Quote on RBI MPC Outcome Reaction by Deepak Agrawal, CIO-Debt, Kotak Mahindra AMC

RBI unanimously decided to hold policy repo rate at 5.25% and stance as neutral. RBI has revised inflation projection for FY27 upwards to 5.1% from 4.6% while growth for FY27 has been revised downwards at 6.6% from 6.9%.

The change in projections is largely attributed to rise in energy costs, expected second order effects and geopolitical uncertainty due to West Asia war. However, inflation projections continue to remain in within the band of 4%+-2% as per inflation targeting framework

RBI will continue to remain data dependant. 

RBI has also announced number of forex and capital flow measures to support balance of payment like increase in Fully Accessible Route (FAR) securities universe,  increase in investment limits for NRIs and OCIs in listed equities and hedging support to ECBs and FCNR deposits till Sep 30, 2026. Further, Govt of India gave tax exemptions for foreign bond investors in G-Sec.

Markets continue to price in significant rate hikes by RBI over next 12-15 months. 10 yr Gsec yields have improved marginally post RBI policy and is trading around 6.96% levels.

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