Views on the RBI Policy Rate Cut Impact by Aman Shah - Head Research - Equirus Family Office
Below the Views on the RBI Policy Rate Cut Impact by Aman Shah - Head Research - Equirus Family Office
RBI Cuts Rates, Adds Rs 1 Trillion Liquidity — A Strong Signal Toward Growth Support
The RBI today cut the repo rate by 25 bps to 5.25% in a unanimous move broadly in line with expectations. The decision comes amid historically low inflation, with CPI at 0.25% in October 2025, driven by subdued food prices.The central bank also maintained its neutral stance, keeping the door open for further easing based on evolving inflation, growth, and global conditions. The RBI also announced liquidity measures including Rs1 trillion of OMO purchases and a $5 billion FX swap signal the central bank’s intent to smoothen liquidity and strengthen credit transmission so borrowers fully benefit from lower rates.
We expect inflation to gradually move toward the RBI’s long-term 4% target in FY27, which should provide a favourable backdrop for corporate profitability. Historically, Indian equities have closely tracked nominal GDP growth, and a moderate rise in inflation would help push nominal GDP back into double-digit territory. Despite global headwinds, the Indian economy has remained resilient, and equity valuations appear more attractive than last year. The RBI’s dovish approach aimed at stimulating demand and injecting liquidity should further reinforce the growth outlook. Additionally, the announced OMO programme is likely to exert downward pressure on G-sec yields, potentially guiding them toward the 6% level over the course of this financial year.
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