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Informist, Friday, Dec. 5, 2025

 

By Gopika Balasubramanium

 

MUMBAI – India's headline indices will likely move in a thin range next week and investors are likely to track the outcome of US Federal Reserve's two-day monetary policy meeting starting Monday. Analysts said there was optimism in the market after the repo rate cut by the Reserve Bank of India; however, worries over rupee near its record low still linger. Analysts see limited downside to the Indian equities as India's macroeconomic conditions are strong. 

 

"Looking ahead, volatility may persist with a positive bias as investors digest RBI's dovish action and track global triggers," said Vinod Nair, head of research at Geojit Investments. The US Fed meeting and clarity on India–US trade talks will be key, while Q3 (Oct-Dec) earnings optimism faces risks from rupee swings, widening CAD (current account deficit), and global trade tensions."

 

In the latest development, CNBC-TV18 reported quoting sources that the US trade delegation is expected to visit India next week for trade talks, dates for india-US bilateral talks are being finalised. This comes amid the rupee hitting record lows this week, and banks buying dollars on behalf of foreign investors who exited Indian equities and importers. 

 

Friday, the RBI's Monetary Policy Committee cut the repo rate by 25 basis points to 5.25%, the lowest rate since July 2022. Including the cut in December meeting, so far the central bank has reduced the policy repo rate by 125 bps. The RBI governor said he sees the policy rates to be low and not high in the future, given inflation staying benign. The RBI raised growth forecasts of India's GDP to 7.3% from 6.8% and also those of Oct-Dec and Jan-Mar by 30-60 bps.

 

"We believe weaker growth down the line, low for long inflation, and tight fiscal policy may require growth-supportive monetary policy in 2026 as well," HSBC Global said in a note. Even though RBI lowered inflation forecast by 50 bps to 4.0% from 4.5?rlier, HSBC forecasts the inflation falling by 50 bps to around 3.5%. "If we are correct, and the RBI eventually makes further downward adjustment to inflation, there would be space to ease further, if growth requires it," the broking firm said. "As such, we believe there are risks of further rate cuts in FY27, alongside more liquidity infusion," it added.

 

Shares of companies related to rate sensitive sectors such as banking, non-banking financial entities, real estate, and automobile, will likely see some upside as lower interest rates are seen as a positive. 

 

"A 25 bps repo rate cut is broadly positive for the lending sector, though with differing intensity across banks and NBFCs," Ninad Jadhav, equity research analyst covering banking sector at LKP Securities, said in a note. For banks, the immediate effect is a mild compression in net interest margin as loan yields reset faster than deposit costs but this is partly cushioned by improving liquidity, a narrowing savings–term deposit rate gap, and the gradual repricing of high-cost term deposits, he added.

 

Lower rates should support credit demand across retail and small-and medium enterprises. As a result, large banks such as HDFC Bank, ICICI Bank, and State Bank of India, with strong current account and diversified loan books, are likely to maintain stable profitability despite modest margin pressure. "Overall, the rate cut provides a moderate tailwind for banks and a meaningful boost for NBFCs, with the greatest benefits accruing to lenders with granular retail franchises and strong liability or capital profiles," he said.  End
 

Edited by Akul Nishant Akhoury

 

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