RBI holds repo rate at 5.25%; here's what it means for markets, key sectors

The RBI MPC, led by governor Sanjay Malhotra, on Friday, announced to keep the repo rate unchanged at 5.25 per cent

The Reserve Bank of India (RBI) Monetary Policy Committee (MPC), led by governor Sanjay Malhotra, on Friday, February 6, 2026, announced to keep the repo rate unchanged at 5.25 per cent. The RBI MPC also decided unanimously to maintain the policy stance at 'Neutral'.

 

Governor Malholtra said the decision was made after a detailed assessment of evolving macroeconomic conditions and the overall economic outlook. This is the first monetary policy review after Finance Minister Nirmala Sitharaman announced the Union Budget for fiscal 2026-27.

 

Additionally, the MPC also revised the GDP growth rate higher at 7.4 per cent as against the earlier estimates of 7.3 per cent and retail inflation at 2.1 per cent as against 2 per cent in FY26. The RBI MPC decision comes days after India announced trade agreements with the US and the European Union. 

 

 

The RBI decision aligned with market expectations, as market analysts said the policy outcome should be viewed as a positive factor. Here’s how the market analysts interpret the RBI’s decision:

 

Ajit Mishra, senior vice president for research at Religare Broking

For investors, this policy outcome is broadly constructive. A pause after aggressive easing reduces uncertainty around the rate trajectory and supports valuation stability, particularly in rate-sensitive sectors such as banking, NBFCs, real estate, and autos. The neutral stance suggests that future moves will be data-dependent, which may keep bond yields range-bound and favour carry strategies in fixed income.  

 

Equity markets may shift focus back to earnings growth and sectoral fundamentals rather than liquidity tailwinds alone. Cyclical and domestic demand-linked sectors could continue to outperform if growth projections hold, while leveraged and interest-sensitive businesses benefit from the cumulative easing already delivered. However, investors should remain selective, as any upside surprise in inflation could delay further easing and trigger short-term volatility in both rates and equities."

 

Rajeev Radhakrishnan, chief investment officer for Fixed Income at SBI Mutual Fund

 

The policy statement has been broadly along expected lines, with the central bank having done the heavy lifting over the last few months on both policy rates and liquidity infusion. At the same time, the RBI is expected to remain proactive on liquidity requirements, based on anticipated liquidity flows. While this would imply the prevalence of surplus liquidity for a while, it is expected that there will be a much closer alignment of overnight rate settings with the policy rate.

 

Sujan Hajra, chief economist & executive director at Anand Rathi Group

 

The only surprise from our end was the absence of any fresh liquidity-related announcements. The RBI has already injected durable liquidity during December and January, which has meaningfully eased system liquidity. With much of the policy transmission passed through in lending and deposit rates, the policy reinforces a wait-and-watch stance, with future action remaining data-dependent. At the current juncture, with repo at 5.25 per cent and inflation projected closer to 4 per cent, the real rate of 1.25 per cent indicates RBI's bias towards growth as inflation remains under the target band. We think the central bank will continue to hold rates unless we note a material worsening in growth. 

Suyash Patodia, joint managing director at Choice International

The RBI’s decision reflects a balanced policy stance amid moderating inflation and steady economic growth. With FY26 CPI inflation projected at a benign 2.1 per cent, the central bank appears comfortable on the inflation front while maintaining a neutral stance in light of prevailing global uncertainties. At the same time, healthy domestic demand, rising capital expenditure, and continued infrastructure spending support the decision to adopt a wait-and-watch approach. Stable interest rates provide greater visibility to borrowers and investors, particularly benefiting rate-sensitive sectors, while bond yields are likely to remain range-bound with a mild downward bias, provided inflation continues to stay under control.    Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers discretion is advised.