The RBI’s MPC meets this week (Dec 3-5) facing a dilemma: cut the repo rate to boost credit or hold steady after the explosive 8.2% GDP growth. Governor Sanjay Malhotra hinted at “room” for easing. Analysts are divided (12/20 expect a cut), but the market is positioned for stability either way, eyeing rate-sensitive sectors like Real Estate and Auto for a huge rally.1
The big one is here. The RBI’s Monetary Policy Committee (MPC) is meeting this week, deciding if they finally pull the trigger on a rate cut.2 The decision lands on Friday
It’s a genuine dilemma, a tough call. Let’s jot down the two conflicting data points that have the analysts utterly divided:
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Reason for a Cut: Inflation is at a record low.3 And Governor Sanjay Malhotra himself said in November, straight up, that there is “room to cut policy rates.” That communication happened. And then the market started hoping.
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Reason for a Hold: The Indian economy just posted 8.2% GDP growth in Q2 FY26.4 A six-quarter high. That robust number—fueled by manufacturing and services—reduces the pressure on the RBI to pump the brakes less hard.
A poll of 20 economists shows 12 are still leaning toward a 25 basis point (bps) cut to 55.25\%.6 But the remaining 8—including giants like SBI Research—expect a hold. It’s a classic high-stakes, close-call situation.
The Market Scenarios
The thing is, the market seems prepared for both. Experts like Anirudh Garg say the market is resilient regardless.
| Scenario | Market Reaction (Short-Term) | Sectors to Watch | The Logic |
| RBI Cuts Rates (25-50 bps) | Strong, broad-based rally. A “short-term catalyst.” | Real Estate, Auto, Financials (Banking), Consumer Durables. | Lower borrowing costs for corporates and consumers. This boosts loan demand, improves earnings visibility, and injects liquidity. A 50 bps cut would trigger a stronger rally. |
| RBI Holds Rates (Status Quo at 5.5%) | Muted, but stable. Markets are unlikely to react negatively. | Quality stocks with strong cash flow. | The pause signals confidence in the strong GDP growth trajectory. It’s seen as a “prudent balancing act,” guarding against inflation while acknowledging growth. Stability is the name of the game. |
A rate cut would be a huge push for sectors like real estate, auto, and financials—the rate-sensitive ones.7 Lower yields make equities comparatively more attractive, potentially bringing back some Foreign Portfolio Investor (FPI) inflows, too. That cheaper credit happens. And then stronger corporate margins follow
If they hold, the focus just shifts from the immediate decision to the longer-term outlook: when the cuts will start, and how quickly that easing feeds through to businesses and borrowers.
Either way, the market isn’t looking at a panic sell-off. It’s an ongoing situation until Friday, where every piece of commentary is being scrutinized for a final clue.
End…..
