SBI expects RBI to hold rates, turns bullish on Nifty 500 stocks

India's Strong Q2 GDP Data May Lead RBI to Maintain Status Quo on Interest Rates

The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) is likely to maintain a status quo on benchmark interest rates in its December policy meeting, according to State Bank of India (SBI).

Resilient Growth and Low Inflation Trends

Noting resilient growth and low inflationary trends, the RBI MPC has been keeping the repo rates steady for the last two consecutive meetings- in August and in October- after cutting rates by 50 basis points in June.

Chances of Rate Cut Fading

• India's Q2FY26 GDP growth surged to a six-quarter high of 8.2%.
• India's retail inflation plunged to a record low of 0.25% in October.
• Expectations of a shallow rate cut of 25 bps have faded as finer readings of the strong Q2 growth print and the evolving playbook make the choice tilted in favour of a pause in December policy.

Global Monetary Policy Trends

Monetary policy has entered a phase of pause globally, with the number of rate decisions still dominated by cuts, but far fewer in number.

• IMF's projection that global GDP may slow by 10 bps to 3.2% in 2025 on account of rising trade protectionism and uncertainty.
• Inflation may stay above target in the US and subdued elsewhere.

Nifty 500 Outlook

SBI finds concentration risk on the rise in the S&P 500, but the Nifty 500 looks better represented due to the representation of diverse sectors.

• Nearly 40% weightage lopsidedly occupied by the top 10 guns in S&P 500.
• The Nifty 500, in comparison, looks better represented through a wide variety of firms from diverse sectors whose cumulative weightage together comes at nearly 25%, cushioning from the likely buildup of sectoral concentration risk.

RBI MPC Meeting

The RBI MPC meeting will begin on Wednesday, December 3 and the decision on rates and its assessment of growth and inflation trends will be revealed on Friday, December 5 by RBI Governor Sanjay Malhotra.

Disclaimer

This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.