Adhil Shetty, CEO of Bankbazaar.com
The 25 basis points repo rate cut by the MPC is expected to have a positive impact on mutual fund investments. Lower interest rates typically lead to reduced bond yields, making equities and other high-risk assets more attractive to investors seeking better returns. As borrowing costs decrease, corporate earnings are likely to improve, boosting investor confidence in equities and equity-linked mutual funds.
Additionally, with reduced rates, fixed-income investments may become less appealing, encouraging more capital to flow into diversified portfolios. The rate cut also supports economic growth, potentially increasing market liquidity and enhancing returns on mutual funds in the long term. Overall, the rate cut creates a favourable environment for mutual fund investments, particularly in equity-focused schemes.
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Sandeep Bagla, CEO, TRUST Mutual Fund
Some would say that this rate cut by MPC/RBI is premature, that Inflation is not under control yet. Monetary easing is the need of the hour, from a trying to revive the economy perspective. For monetary easing to be effective, more rate cuts are needed for a long period of time. Liquidity needs to be easy as well. I feel that the inflation projection of 4.2% for FY26 is a tad optimistic. I expect further rate cuts of 50 bps during the year. It is a bold move by the RBI.The short-term funds are likely to perform better. The long end of the curve will move lower once the inflation battle is won, which is some time away. There is pressure on currency as well, which will make interest rates volatile, though within a range.
Anurag Mittal, Head of Fixed Income at UTI AMC
Today’s policy was well balanced and was largely a continuation of the stance change in Oct and CRR cut in December. The MPC still retained its neutral stance and did not overcommit on liquidity. The RBI also continues to remain comfortable on the domestic growth outlook. This indicates a shallow rate cut cycle ahead. Hence we continue to prefer short to medium duration products given the favourable risk reward
Mahendra Kumar Jajoo, CIO Fixed Income at Mirae Asset Investment Managers (India)
In line with the market consensus, MPC reduced key policy repo rate by 25 bps. Keeping in mind the prevalent volatile geopolitical situation, stance has been retained as neutral. Guidance seems to be of further rate cuts in coming quarters.
While the GDP growth forecast is at 6.7% for FY26, up marginally from 6.6% at the last meeting, inflation projections are revised downward to 4.5% vs 4.8% in the previous review. Further there is strong guidance for providing adequate liquidity including injecting durable liquidity which typically indicates more open market purchase operations of dated securities.
Thus, policy is a positive response to meaningful fiscal consolidation and guide path in the union budget and seems to set the tone for a deeper easing cycle and possibly more rate cuts to follow. Fixed income markets should witness further strengthening of ongoing momentum and bond yields are expected to ease further in coming months.
Shriram Ramanathan, CIO, Fixed Income, HSBC Mutual Fund
The RBI MPC delivered on market expectations of a 25bps repo rate cut, however it disappointed by retaining a stance at neutral (unanimously) and not announcing any specific new measures on liquidity injection. The new RBI governor Mr Sanjay Malhotra played out a balancing act, by easing rates, while clearly being mindful of the global market volatility and its potential impact on our currency, and hence maintaining a cautious tone.
We expect the RBI MPC to deliver another 25bps cut at the April policy, while continuing to announce liquidity related measures as and when required on a “proactive” basis. While the initial reaction of bond markets has been one of disappointment, with yields inching up a few basis points, we believe interest rates will continue to soften over the next few months and retain our positive duration bias and outlook.
Nilesh Shah, MD Kotak Mahindra AMC
The RBI assured market on durable liquidity and cut rates by 25 bps as inflation remains within the higher range of mandate.
The jugalbandi between monetary policy which is becoming less tight and fiscal policy which is becoming less loose should be supportive for growth and yet manage inflation.
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Pankaj Pathak, Fund Manager -Fixed Income, Quantum AMC
We expect interest rates to decline further. In this environment, investors should consider dynamic bond funds for medium to long term debt allocation.
Prashant Pimple Chief Investment Officer – Fixed Income, Baroda BNP Paribas Mutual Fund
The RBI monetary policy committee unanimously delivered a rate cut of 25bps bringing down the repo rate to 6.25% and the stance continued at neutral. The policy move is in line with our as well as market expectations.
The overall tone of the policy was dovish with Economic Growth to have taken precedence over inflation & currency concerns in this monetary policy. RBI’s intent to support growth is visible, while remaining watchful of global headwinds that could pose risk to domestic growth and inflation outlook. RBIs commitment to provide sufficient liquidity to the banking system was reiterated and was encouraging. Additional liquidity measures may be announced outside of MPC.
Murthy Nagarajan, Head-Fixed Income, Tata Asset Management
Ten-year bond yields have moved up by 5 basis point to 6.70% levels due to heavy positioning of traders in terms of favourable measures along with the repo rate cut of 25 basis points, which did not materialise.
This is a knee jerk reaction as RBI is expected to support growth through liquidity and rate cut measures in the coming months as global uncertainty comes down. The ten year is expected to trade in the 6.60% to 6.70% band for this month
Parijat Agrawal, Head of Fixed Income at Union Asset Management Company
The Monetary Policy Committee (MPC) has, as anticipated, lowered the policy rate by 25 basis points. We foresee a shift towards a more accommodative policy stance in the future, with an additional reduction of 25 basis points likely by June 2025.
The Reserve Bank of India (RBI) did not introduce any new liquidity measures; however, we anticipate that the RBI will ensure adequate durable liquidity as necessary. Additionally, the refinement of the inflation targeting model seems to be a welcome measure. The cost-benefit analysis of regulations could be positive for the markets.
Rajeev Radhakrishnan, CIO – Fixed Income, SBI Mutual Fund
A Rate cut that was widely anticipated and priced in was delivered by the RBI MPC. Policy rate reduction was clearly a question of timing in the current context considering the evolving situation on the currency led by global factors and capital flows. At the same time, there has been no change in stance or any other provision of liquidity support. While the rate cut was clearly subjective, the lack of specifics on liquidity could potentially impede transmission.
While yields have moved up a bit, it is anticipated that the RBI would continue to ensure targeted infusion of liquidity over the coming months that should enable yields to stay anchored. Overall, the weaker than anticipated growth over the previous year and projection on CPI for FY26 closer to the target has provided confidence to the RBI to ease rates.
Raghav Iyengar, CEO, 360 ONE Asset
RBI’s rate cut gives a renewed boost to economic growth. Debt and Hybrid Mutual Funds are well-positioned to capitalize, along with equity funds tilted towards interest-sensitive sectors. Mutual fund investors should preferably stay invested to ride the course
Viram Shah, Founder & CEO, Vested Finance
The rate cut will likely further narrow the US-India bond yield spread that is already at 20-year low, making the US bonds more attractive for foreign investors. This may lead to more outflows in coming months leading to investments into US bonds and stock markets. A weak rupee also makes a case for investing in US markets as investors will benefit from strong dollar. At the time Indian market has been struggling, investors should consider investing in global equities, especially US-listed, as they may not just provide alpha but also help diversify their portfolio. Domestic focused stocks in the US, such as utilities, steelmakers, etc. look attractive
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
