RBI MPC outcome tomorrow: From rate pause to dovish stance — Here's what Indian stock market investors can expect

Mint

16 hours ago

RBI MPC meeting August 2025: The Reserve Bank of India (RBI) Monetary Policy Committee meeting, which started on August 4, will conclude on Wednesday, August 6, presented by Governor Sanjay Malhotra.
The consensus suggests that the RBI is likely to hold the gunpowder dry for now and is unlikely to announce any rate cuts. Despite fresh trade tensions sparked by US President Donald Trump's move to impose a 25% tariff on Indian goods and looming sanctions over Russian oil imports—India's central bank is expected to stay the course on interest rates, shows a Mint poll of 15 economists.
Only four of them anticipate a 25 basis points cut to 5.25% in the upcoming MPC outcome.
RBI has implemented a sharp rate-cutting cycle over its past three policy meetings, lowering the benchmark interest rate from 6.5% to 5.5% in total, after maintaining a steady rate for eleven months.
'Complementing this rate-cut cycle, the central bank also delivered a substantial 100-basis-point reduction in the Cash Reserve Ratio during its previous meeting, a move expected to infuse approximately ₹ 2.5 trillion into the banking system by November 2025, significantly enhancing systemic liquidity,' said Sugandha Sachdeva, Founder, SS WealthStreet.
Here are the top 4 expectations of the Indian stock market from the upcoming RBI MPC meeting -
The upcoming August monetary policy meeting is set against the backdrop of a significant decline in headline inflation in recent months, mainly due to falling food prices. Inflation is expected to remain below the 4% target on average over the next two quarters, aided by a favourable base effect and subdued food inflation.
'The MPC is widely expected to hold the policy rate steady at 5.5% in the upcoming meeting, allowing the economy more time to absorb the transmission of earlier rate cuts. A pause at this juncture would be consistent with the RBI's forward-looking approach, especially as previous liquidity injections and rate reductions are still working their way through the system,' Sachdeva said.
She further added, ' While a further 25bsp rate cut cannot be entirely ruled out, it appears unlikely in the immediate term, given the front-loaded nature of recent policy action. That said, with inflation well within the RBI's comfort zone and external risks still unfolding, the probability of additional easing in the next policy review remains firmly on the table.'
However, Anuj Gupta, Director, Ya Wealth Research & Advisory, also believes a 25 bps rate cut is likely. 'This is likely to happen because of the focus on the upcoming festival season. The past data show a clear trend that any repo rate cut ahead of Diwali results in higher credit growth during the festive period. This step will provide liquidity to the markets, and the market may take support from it,' said Gupta.
According to the CareEdge Ratings report on RBI Policy, the CPI inflation eased further to 2.1% in June, coming below expectations and marking the lowest print since January 2019.
'Overall inflationary environment is likely to remain favourable over the next few quarters. However, inflation is likely to inch up above the 4% mark in the fourth quarter of this fiscal year as the favourable base effect wanes. CPI inflation is likely to undershoot the RBI's FY26 projection of 3.7%. Accordingly, the RBI may revise its inflation forecast downward. We expect CPI inflation to average around 3.1% in FY26. Given the low base of FY26, we expect average CPI inflation to be higher, around 4.5% in FY27,' the report said.
Sugandha Sachdeva of SS WealthStreet highlighted that these accommodative policy measures have been strategically aimed at reviving economic momentum, improving credit flow, and stimulating aggregate demand in the face of slowing global growth and trade tariff-related challenges.
'However, the outlook is not without risks. Ongoing trade tensions and escalating tariffs imposed by the United States pose potential downside risks to India's external sector and overall growth trajectory. These global headwinds could prompt the central bank to retain a dovish tone,' she said.
The RBI's liquidity injection has kept the overall banking system liquidity in surplus. The announced phased 100 bps CRR cut beginning September is expected to inject about ₹ 2.5 trillion of durable liquidity into the system by December, according to the CareEdge report.
Additionally, RBI's record ₹ 2.7 trillion dividend transfer to the Government adds to the durable liquidity, which should flow into the system as government spending remains healthy, the report added.
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