2 hrs ago
RBI Hikes Rates, Signals No Near-Term Cuts as Markets Reassess
India’s central bank raised the main interest rate by a small amount.
Its governor said a rate cut soon is unlikely, and the next move may be to keep rates steady or raise them again.
Higher rates can make borrowing costlier for people and businesses.
That may put pressure on some shares, including in banking, cars and property.
The stock market fell during the day but later recovered some ground.
The RBI also expects the economy to keep growing and raised its growth forecast.
Analysts said company profits will be important for what happens to shares next.
They said businesses with strong finances may be better able to handle higher borrowing costs.
The RBI’s Monetary Policy Committee unanimously raised the repo rate by 25 basis points to 5.50%, its first hike in four years.
Governor Sanjay Malhotra said future policy moves could be a pause or another hike; near-term rate cuts appear unlikely.
The RBI projected December-quarter inflation at 6% and raised its FY27 real GDP growth forecast to 7.1%.
Sensex closed down 0.58% at 72,644.63 on policy day after recovering some intraday losses; the Nifty also rebounded from its low.
Analysts warned of near-term valuation and rate-sensitive sector pressure, while saying earnings and resilient growth could support quality companies.
- Who
- The Reserve Bank of India’s Monetary Policy Committee and Governor Sanjay Malhotra.
- What
- The committee raised the repo rate by 25 basis points to 5.50%; Malhotra indicated near-term cuts are unlikely.
- Where
- India.
- When
- Wednesday, October 7, 2026.
- Why
- The RBI cited persistent price pressures and said future policy decisions would depend on growth, inflation and the outlook.
Near-term market risks
Resilience and longer-term support
Valuations and rate-sensitive sectors
Near-term market risks
Seema Srivastava said higher rates and reduced expectations of easier liquidity could compress valuations and pressure some banking stocks, NBFCs, automobiles and real estate.
Resilience and longer-term support
Srivastava said resilient economic activity and strong underlying fundamentals could cushion markets against a deeper correction.
Role of earnings
Near-term market risks
Harshal Dasani said the loss of expectations for rate cuts removes a source of valuation support, so benchmark markets will increasingly depend on earnings.
Resilience and longer-term support
Both analysts pointed to corporate earnings and financially strong businesses as potential supports; Dasani also noted that the Nifty recovered after the first RBI rate hike in 2022 while rates were still rising.
Key facts
- Repo rate
- Raised by 25 basis points, from 5.25% to 5.50%.
- Rate decision
- The RBI’s first rate hike in four years; the MPC decision was unanimous.
- Inflation projection
- 6% for the December quarter.
- FY27 real GDP growth forecast
- Raised to 7.1%.
- Sensex policy-day close
- Down 0.58% at 72,644.63.
- Sensex intraday range
- Low of 72,520.73 and high of 72,969.57.
- Nifty 50 intraday range
- Low of 22,578.25 and high of 22,701.60.
Quotes
Seema Srivastava
Senior Research Analyst at SMC Global Securities.
“The duration and extent of the rate hike cycle, therefore, would be contingent on the actual growth inflation development and outlook, especially that of underlying inflation, extent of broadening of price pressure, and speed round effects on the supply shock.”
livemint.com
“Ultimately, while multiple expansions may pause as the market adjusts to a higher-for-longer interest rate environment, India's solid macroeconomic foundation ensures that long-term equity compounding remains intact for quality businesses.”
livemint.com
Sources
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