India’s economy is sending mixed signals. On one hand, GDP growth jumped to 8.2% in Q2, showing strong overall momentum. On the other, manufacturing growth has slowed sharply, and industrial output remains weak. Adding to this, retail inflation fell to a record low, giving the RBI some room to consider easing rates.
Because of these factors, markets expect the RBI could announce a 25 basis point rate cut on December 5.
So, what does this mean for stocks?
Most experts believe that a small rate cut by itself may not trigger a strong rally. Equity markets are currently more concerned about liquidity constraints, especially with money getting absorbed by multiple IPOs. Also, the rupee has weakened, which limits how aggressively the RBI can cut rates.
What markets really want is confidence that more rate cuts are coming. However, experts feel India is close to the end of the rate-cut cycle, which means the RBI may avoid giving strong forward guidance.
What this means for investors:
A rate cut could offer short-term comfort, but sustained market momentum will likely depend on broader liquidity conditions and the RBI’s forward guidance rather than just this decision.