Robust growth in manufacturing, services, investment and private consumption helped India’s economy expand 7.7% in FY26, while economists expect growth to moderate to 6.4%-6.6% in FY27 amid global uncertainties, inflation concerns and monsoon-related risks.
The RBI retained the policy rate and neutral stance in its June MPC meeting, while lowering FY27 GDP growth projections to 6.6% and raising inflation forecasts to 5.1% amid geopolitical tensions, elevated energy prices and monsoon-related risks.
Rising crude prices, fuel pass-through and higher milk costs are widening the gap between wholesale and retail inflation.
CPI inflation inched up to 3.40% in March, driven by rising imported costs and pressure from fuel and housing segments.
Strong macro fundamentals and low inflation place India in a “Goldilocks” zone. Valuations near long-term averages signal potential for above-average market returns.
The Reserve Bank of India’s decision to hold rates signals a cautious, hawkish undertone amid global uncertainties, even as it maintains policy stability.
After a soft start, India’s 10Y yield turned sticky in H2FY26 amid rising supply concerns and global geopolitical tensions. Oil shocks and volatile capital flows have added to upside risks, keeping yields elevated.
The RBI is expected to hold the policy repo rate unchanged at 5.25% and keep the stance as neutral.
Despite strong macro fundamentals and ample forex reserves, rising volatility and structural pressures call for calibrated RBI intervention to stabilise the rupee.
While all-India core inflation only increased by 5 bps to 3.40% in Feb’26, the state-wise trend is quite divergent.
