RBI Governor Sanjay Malhotra stated that central banks globally are facing an increasingly difficult task in stabilising economies amid persistent volatility. Speaking after the Monetary Policy Committee (MPC) meeting, Malhotra noted that the global outlook remains fragile, but the Indian economy still presents immense opportunities for investors.
In a move that surprised markets, the Reserve Bank of India cut the repo rate by 50 basis points, bringing it down from 6.00% to 5.50%. This was a sharper cut than expected. A report by Nuvama had earlier estimated a 25 bps reduction, citing softening demand conditions, subdued inflation hovering below 4%, and easing liquidity. The report had projected that the repo rate may gradually fall to the 5–5.25% range over the easing cycle.
The central bank’s dovish stance had an immediate impact on the bond market. The yield on India’s 10-year government bond fell over 9 basis points to 6.1611%, compared to the previous close of 6.2465%. This marks a strong response from fixed income markets to the unexpected magnitude of the rate cut.
The Indian rupee, meanwhile, opened slightly weaker in early trade, with the 1-month non-deliverable forward indicating a range of 85.86–85.90 versus the previous close of 85.79. The U.S. jobs data, due later today, is also being closely watched for further global cues.
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