RBI Cuts Repo Rate to 6% in April 2025: Impact on Indian Equity Market and Sectoral Outlook
In a significant monetary policy decision that aligns with market expectations, the Reserve Bank of India (RBI) slashed the repo rate by 25 basis points to 6.00% on April 9, 2025. This marks the second consecutive rate cut by the central bank and comes with a strategic shift in policy stance from “neutral” to “accommodative,” signaling a clear pivot towards stimulating economic growth amid mounting global uncertainties.
The policy announcement, made during the first Monetary Policy Committee (MPC) meeting of FY 2025-26, also retained the Cash Reserve Ratio (CRR) at 4%, the Standing Deposit Facility (SDF) at 5.75%, and the Marginal Standing Facility (MSF) and Bank Rate at 6.25%.
What Prompted the RBI’s Decision?
The rate cut was driven by a combination of softening inflation, slowing domestic consumption, and rising concerns around global trade tensions, especially following fresh tariffs imposed by the United States. RBI Governor Sanjay Malhotra, presiding over his second policy meeting since assuming office, highlighted that Consumer Price Index (CPI) inflation is projected at 4% for FY 2025-26, down from 4.8% the previous year, giving the central bank more room to act on growth.
The GDP growth forecast was also revised down from 6.7% to 6.5%, factoring in trade disruptions and subdued global demand. According to Malhotra, “The shift in stance to accommodative opens the door for further easing, should inflation remain contained and external risks persist.”
Equity Market Reaction: Mixed Signals with Sectoral Divergence
The Indian equity markets reacted cautiously to the announcement. The Nifty hovered around 22,400, while the Sensex slipped by 400 points, as investor sentiment was dampened by weak global cues. Notably, auto and FMCG stocks outperformed, while technology, metals, and energy sectors bore the brunt of profit-booking and economic concerns.
Let’s break down the sector-wise impact of this RBI policy decision:
📈 Sectors Likely to Benefit Positively
- Banking & Financial Services
Lower interest rates improve liquidity and reduce the cost of funds for banks and NBFCs. Expect improved credit offtake, especially in retail and MSME segments.
- Key Stocks to Watch: HDFC Bank, SBI, Bajaj Finance
- Infrastructure & Real Estate
An accommodative stance usually revives infrastructure investments and boosts housing demand, thanks to lower home loan EMIs.
- Key Players: L&T, DLF, Godrej Properties
- Automobiles
The auto sector thrives in low interest rate environments, as vehicle loans become more affordable, particularly in rural and semi-urban markets.
- Top Gainers: M&M, Maruti Suzuki, Hero MotoCorp
- Consumer Durables
Easier credit availability combined with falling inflation supports demand for white goods and electronics.
- Stocks in Focus: Havells, Voltas, Whirlpool
📉 Sectors Likely to Face Pressure
- Information Technology (IT)
A weakening rupee, combined with global growth slowdown and reduced exports, may compress margins and hurt top-line growth.
- Lagging Stocks: Infosys, Wipro, Tech Mahindra
- Metals & Mining
Global trade tensions and lower industrial activity internationally may curb demand for base metals.
- Vulnerable Entities: Tata Steel, JSW Steel, Hindalco
- Oil & Gas
Import-driven sectors may see cost pressures due to currency depreciation, especially if global crude prices remain elevated.
- Watch List: ONGC, Indian Oil, Reliance Industries
Few Market Experts expect two more rate cuts in the near term, possibly starting with the June policy. They anticipate GDP growth closer to 7%, helped by easier financial conditions and healthy corporate earnings.
Market Experts React
The RBI’s move has drawn varied reactions from economists and market analysts:
- Sakshi Gupta, HDFC Bank: “We expect two more rate cuts in the near term, possibly starting with the June policy.”
- Garima Kapoor, Elara Securities: “The RBI is likely to remain growth supportive. A total of 75 bps cut in FY26 is our base case.”
- Sujan Hajra, Anand Rathi Group: “We anticipate GDP growth closer to 7%, helped by easier financial conditions and healthy corporate earnings.”
- Radhika Rao, DBS Bank: “We foresee another 50 bps cut this year, considering dovish policy guidance.”
- Upasna Bhardwaj, Kotak Mahindra Bank: “The policy was in line with expectations, and we maintain a bias toward further easing.”
RBI’s Forward Guidance and Next Meeting Date
The next MPC meeting is scheduled for June 5-7, 2025, and expectations are building around another 25-50 bps rate cut, provided inflation remains under control. Most experts agree that monetary easing is being front-loaded, and the RBI will continue to prioritise domestic growth over external shocks.
What Should Investors Do?
With the RBI adopting a clearly growth-supportive stance, sectors like banking, infra, and consumption are poised to gain momentum. However, caution is advised in globally exposed sectors like IT and metals, which may continue to face headwinds.
Investors with long-term horizons should focus on sectoral rotation strategies and identify value picks in beneficiary sectors. It’s also an opportune time to reassess portfolios to balance growth and safety amid evolving macroeconomic dynamics.
Final Thoughts
The RBI’s April 2025 policy underscores its commitment to supporting India’s economic recovery amidst external shocks. While the central bank maintains a cautious yet accommodative approach, the Indian equity market is likely to experience short-term volatility, with selective sectoral tailwinds and headwinds.
Stay tuned for the June policy review, which may hold further cues for the market and signal the trajectory of India’s monetary policy in FY26.
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Disclaimer: The views and investment insights provided here are based on publicly available information and do not constitute financial advice. Readers are advised to conduct their own research or consult certified financial experts before making investment decisions.