The Reserve Bank of India, under the leadership of Governor Sanjay Malhotra, has kept the repo rate unchanged at 5.5% in its latest monetary policy announcement. This move, widely expected by analysts, signals a continuation of the central bank’s ‘neutral’ stance, allowing flexibility to act based on evolving economic data. Following the announcement, the equity markets reacted with visible volatility. The BSE Sensex slipped by 261 points to hit a day’s low of 80,448.82, while the Nifty 50 dropped 105 points, touching 24,544.15 intraday. Broader indices underperformed, with the Nifty Midcap and Smallcap indices declining over 1.2%.
The RBI’s decision to maintain the status quo comes despite revising its CPI inflation forecast downward for FY26—from 3.7% to 3.1%. Retail inflation, however, is expected to rise in the last quarter of FY26, although core inflation remains stable around 4%. Governor Sanjay Malhotra emphasized the positive medium-term outlook for India, citing robust fundamentals, internal strength, and favorable global shifts.
Rate-sensitive sectors showed a mixed reaction. The Nifty Bank and Nifty Financial Services indices traded flat, while the Auto and Realty indices fell 0.65% and 1.75% respectively. Among banking stocks, Kotak Bank, ICICI Bank, SBI, and HDFC Bank stayed in the green, whereas IndusInd Bank, IDFC First Bank, and AU Small Finance Bank were top laggards. The Auto index saw heavy losses, led by Bosch, down 4.6%, followed by Balkrishna Industries and Motherson. Maruti and Eicher Motors were among the few gainers. Realty stocks were uniformly negative, with Prestige, DLF, Lodha, and Godrej Properties each losing over 1%.
Nifty IT and Pharma also witnessed significant declines, shedding more than 1% each, while FMCG and Metal sectors were marginally lower. In contrast, select stocks like Trent, Asian Paints, Adani Ports, and Coal India emerged as top gainers on the Nifty, offsetting some of the overall bearish sentiment.
The unchanged policy rate, coupled with a ‘dovish pause’, indicates RBI’s cautious optimism. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that the decision reflects the central bank’s wait-and-watch approach as it monitors the impact of the prior 50 basis point cut. He suggested the easing inflationary trend, supported by a favorable monsoon and Kharif sowing, might create room for a rate cut later in the cycle.
Real estate stakeholders welcomed the policy continuity. Sudhir Pai, CEO of Magicbricks, commented that while a rate cut would have offered immediate relief to homebuyers, the unchanged stance ensures affordability does not deteriorate. He emphasized that stable policy conditions support sustained demand, particularly in the mid-to-premium housing segments, and foster long-term planning among developers.
The RBI’s decision, though not groundbreaking, reinforces stability in the financial system. While markets digested the announcement with short-term corrections, the underlying message from the central bank remains clear: inflation targeting continues to be the priority, and India’s growth path remains resilient amid global uncertainties.