The Reserve Bank of India (RBI) is set to announce its Monetary Policy Committee (MPC) decision on June 6, with market consensus strongly favoring a 25 basis points rate cut, marking the third consecutive reduction.
This anticipated move comes amid a backdrop of controlled food and fuel inflation, an early monsoon, and a robust macroeconomic environment, which together provide the RBI with room to ease interest rates further. Market expert Abhishek Basumallick notes that this could pave the way for "two to four more rate cuts over the next year."
Interest rate-sensitive sectors, especially public sector banks (PSUs), are expected to benefit significantly from the rate cut. The market is already pricing in this 25 bps reduction, which is likely to improve the outlook for these sectors.
Despite mixed global signals and foreign institutional investors turning net sellers, domestic institutional investors have remained bullish, injecting substantial funds into the market, supporting resilience in benchmark indices.
"The central bank’s stance on the rate trajectory, especially amid mixed macroeconomic signals, will be critical in shaping market direction," analysts say.
India’s economy has shown strong growth, expanding at a 6.5% rate in the last quarter of the 2024-25 fiscal year, elevating its size to USD 3.9 trillion and positioning it to surpass Japan as the world’s fourth-largest economy by FY26.
With inflation trending lower and favorable economic indicators, the RBI’s expected rate cut is seen as a strategic move to sustain growth momentum and support key sectors sensitive to interest rate changes.
Key Quote: "Controlled food and fuel inflation and a favorable macroeconomic backdrop could pave the way for two to four more rate cuts over the next year," said Abhishek Basumallick.
Key Stat: India’s economy grew at
6.5% in the last quarter of 2024-25, reaching a size of
USD 3.9 trillion.
Investors will closely watch the RBI’s June 6 decision for guidance on future monetary policy and market direction.
The Reserve Bank of India’s June 6 Monetary Policy Committee meeting is widely expected to announce a 25 basis points rate cut, the third consecutive reduction, boosting PSU banks and rate-sensitive sectors amid controlled inflation and a favorable macroeconomic environment.
