Udaipur, April 10, 2025 - The Reserve Bank of India (RBI) has cut the Repo Rate by 25 basis points (bps) to 6.00% while moving the policy stance from Neutral to Accommodative. Their priority is shifting from inflation to growth. The market was anticipating this rate cut and the 10 year bond yields fell around 20 bps in one month.

Headline inflation cooled to 3.6% in February, well within the RBI’s target range, aided by falling vegetable prices, easing fuel costs and a strong rabi crop outlook. These factors have led to the Monetary Policy Committee (MPC) reducing their inflation expectation for FY26 from 4.2% to 4%.

On the other hand, while domestic growth is showing signs of recovery - led by a pick-up in rural demand - persistent trade tensions and global uncertainties have prompted a downward revision in FY26 growth expectations from 6.7% to 6.5%.

If inflation remains in control and growth continues to be a concern, we may see further rate cuts by RBI in future policies aimed at revving up the economy. For consumers, this means cheaper home and auto loans. Borrowers with floating rate loans should see EMIs fall in the coming months. However, fixed deposit rates may decline too, and it would be prudent for investors to capture the FD rates before they fall.

The next few months are going to be full of geopolitical turmoil with the Donald Trump administration levying tariffs and creating an upheaval of the current trade arrangements. This would make it difficult for businesses to plan their investments and this uncertainty itself would be an impediment to growth.

For investors, I would suggest they reassess their asset allocation and be diversified across asset classes. Having sufficient allocation to Cash & Debt will help to combat this medium-term volatility. They should also take the opportunity to invest when attractive opportunities emerge.