The Reserve Bank of India (RBI) has cut the repo rate by 25 basis points, marking a quarter-percentage-point reduction. The bank rate and related rates, including the marginal standing facility, have also been reduced by a similar margin.
Maintaining a neutral stance, the RBI's monetary policy approach allows room for intervention when necessary. The decision was taken unanimously by the Monetary Policy Committee, which noted a considerable decline in inflation.
Despite this move, stock indices and the rupee weakened following a downward revision in the growth forecast for the coming year, now projected at 6.7 per cent. This marks the first reduction in the repo rate in five years. The repo rate is the interest charged on overnight loans that banks borrow from the RBI during emergencies.
The central bank expects GDP growth for 2025-26 to stand at 6.7 per cent, compared to its previous estimate of 7 per cent. This year’s growth projection remains at 6.6 per cent, while the National Statistical Office (NSO) estimates growth at 6.4 per cent. The July-September forecast has been revised from 7.3 per cent to 7 per cent.
Inflation forecasts have also been lowered, with this quarter’s figure revised from 4.5 per cent to 4.4 per cent. Annual inflation is expected to settle at 4.8 per cent, with a projected reduction to 4.2 per cent by the end of the next financial year.
Several companies experienced significant share price declines following weaker financial results. Bikaji Foods saw a 12 per cent drop due to lower profits and shrinking margins. Cochin Shipyard's shares slipped 4 per cent after posting disappointing earnings.
Sonata Software shares plummeted 14 per cent, while NCC Limited's stock fell 12 per cent, both due to declining revenue growth and profits.
The rupee opened the day higher, with the dollar trading at ₹87.45, down by 13 paise. It briefly rose to ₹87.48 before slipping to ₹87.43. Following the monetary policy announcement, the rupee strengthened to ₹87.39 before closing at ₹87.48.
In the international market, gold stood at $2,868 per ounce. In Kerala, gold jewellery prices remained stable at ₹63,440 per sovereign.
Crude oil prices rose slightly, with Brent crude trading at $74.68 per barrel.