RBI holds repo repo at 5.5%: Analysts decode impact on markets, key sectors

The RBI decision aligned with market expectations as market experts welcomed the move, calling it in line and a constructive backdrop for the markets

The Reserve Bank of India (RBI) governor, Sanjay Malhotra, on Wednesday, August 6, 2025, announced to keep the repo rate unchanged at 5.5 per cent. The six-member Monetary Policy Committee (MPC) voted to maintain the policy stance at 'neutral'. 

 

“The current macroeconomic conditions, outlook and uncertainties call for continuation of the policy repo rate of 5.5 per cent and wait for further transmission of the front-loaded rate cuts to the credit markets and the broader economy. Accordingly, the MPC unanimously voted to keep the repo rate unchanged,” Governor Malhotra said.

 

In addition, the committee reduced its FY26 retail inflation projection from 3.7 per cent to 3.1 per cent. It retained the FY26 growth outlook at 6.5 per cent. The above-normal southwest monsoon, lower inflation, rising capacity utilisation and congenial financial conditions are expected to provide support to domestic economic activity, the MPC added.

 

How did stock markets react to the RBI's policy decision?

Following the announcement, Indian equities edged lower. Around 12:10 PM, Sensex was down 115 points or 0.14 per cent at 80,595.7 levels. Similarly, Nifty50 fell 57.5 points or 0.23 per cent to 24,592 levels. However, rate-sensitive sectors, including Nifty Realty, Auto, and Bank, were also trading on a mixed note in intraday deals. The Nifty Auto was down 0.5 per cent, Nifty Realty fell 1.5 per cent, and the Nifty Bank index was down 0.04 per cent.   ALSO READ: RBI announces 3 consumer-centric schemes to drive financial inclusion

Here's what experts say on the RBI's policy decision:

The RBI decision aligned with market expectations as market experts welcomed the move, calling it in line and a constructive backdrop for both equity and debt markets. 

 

Anil Rego, founder & fund manager, Right Horizons PMS

 

The RBI’s decision is in line with market expectations and signals a deliberate pause after frontloading 100 bps in cuts earlier this year. With headline inflation easing sharply in June, CPI at just 2.1 per cent and core inflation remaining well anchored, the central bank is justified in maintaining a wait-and-watch approach. The policy stance remains neutral, but with a distinctly dovish tone, suggesting openness to further easing should growth or global conditions warrant it.

 

From a market perspective, the RBI’s tone will be viewed as growth-supportive without being reckless, especially as inflation is expected to be at 3.1 per cent for FY26. Rate-sensitive sectors such as banking, real estate, and autos could benefit from the sustained dovish backdrop.

 

VK Vijayakumar, chief investment strategist, Geojit Investments

 

The MPC’s decision can be described as a ‘dovish pause.’ Downtrending inflation in the backdrop of good monsoon and Kharif sowing will keep inflation well anchored, enabling the MPC to go for another rate cut in this rate-cutting cycle.

 

The RBI Governor’s view that “we are waiting for the transmission of front-loaded rate cut” is the right view under the present circumstances. This policy of dovish pause while continuing with the neutral policy stance is good for the banking and other rate-sensitive sectors."  ALSO READ: RBI policy: MPC maintains repo rate at 5.5%, keeps stance 'neutral' 

 

Sujan Hajra, chief economist and executive director, Anand Rathi Group

  The MPC decision was shaped by continued robust economic growth, the substantial liquidity infusion following recent rate cuts, and lingering global uncertainties—most notably, unpredictability in US trade policy. The ongoing transmission of past monetary easing and the evolving global backdrop appear to have placed the RBI firmly in wait-and-watch mode.

 

With medium-term inflation now projected to hover around the 4 per cent mark, we expect the terminal repo rate in this cycle to settle near 5 per cent. Overall, today’s policy announcement and outlook reinforce a constructive backdrop for both equity and debt markets.

 

Madhavi Arora, chief economist, Emkay Global Financial Services

 

Despite sharply lowering its inflation forecast to 3.1 per cent from 3.7 per cent earlier, RBI’s decision to keep rates steady emanates from their focus on one-year-ahead expected inflation that’s looking comfortably above 4 per cent, while growth in their view has held up well, despite global uncertainty. However, focusing on one-year-ahead expected inflation appears increasingly misplaced in an evolving world, particularly as the global landscape continues to shift toward a disinflationary bias in Asia. 

 

We think going ahead, downside risks to growth would be increasingly evident with new global resets and could still open up space for easing in the remainder of the year, even though the Governor seems to have raised the bar higher for further easing.