Could cooling November inflation cement RBI’s rate cut decision? Firstcry, CEAT in focus

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A welcome pause in India’s inflation surge has kindled hopes of a market revival, as investors speculate on a potential monetary policy shift. After keeping rates steady for 11 consecutive meetings, the Reserve Bank of India (RBI) may finally have room to manoeuvre, thanks to signs of cooling price pressures in November.

October’s inflation print of a 14-month high had stoked fears of prolonged financial strain on businesses and households. But the latest respite offers a breather—not just for consumers and policymakers but also for markets that have been navigating turbulent waters in the past couple of months.

So are rate cuts on the horizon now? The RBI’s Monetary Policy Committee (MPC) is scheduled to meet in February, and the prospect of a rate cut—the first in over a year—appears more plausible than ever. Earlier, the former RBI Governor Shaktikanta Das, in the last MPC meeting, underscored the persistence of food inflation, cautioning that it would likely remain elevated through the third quarter of FY25.

However, he hinted at potential moderation by the fourth quarter, offering a silver lining. Das also flagged risks from erratic weather, geopolitical uncertainties, and global market volatility, emphasising the fine balance the RBI must maintain.  Amid these there is still a lot of guess work around the policy changes US President-Elect Trump will bring in and their effect on inflation and US bond yields.

The upshot: the intervening period until February will be crucial. Not only will the global rates scenario, but also how India’s growth pans out over the next few months will determine how RBI steers interest rates next year.

For now, a 50-basis-point reduction in the cash reserve ratio (CRR) is expected to infuse liquidity into the banking system, lifting market confidence. Historically, Indian equity markets have reacted positively to monetary easing, and a dovish RBI stance could bolster sentiment further especially as it might address the demand growth issues, at least partly.

Brainbees Solutions (Rs 603.20, +1%)

Shares rose after KIE initiated coverage with an ‘add’ rating,

Bull case: Increasing scale and improving profitability will drive 17 percent revenue CAGR and 30 percent adjusted EBITDA CAGR in this business over FY24-27, predicts KIE. Globalbees turning profitable provides more growth visibility for the business

Bear case: Consumption slowdown in urban areas and weak macro trends can hurt demand and earnings growth. Failure to reduce losses in Middle East business can weigh on margin growth.

CEAT (Rs 3,185, 1.14%)

Signed an agreement with Michelin to buy Camso brand’s Off-Highway construction equipment tyre and tracks business for about $225 million.

Bull Case: The management expects synergies in channel and clients to lead to further market-share gains, with dual-brand play possibly going ahead. CEAT expects the international segment to contribute 25 percent to revenues post completion. After the initial three years, CEAT will be able to use the well-known Camso brand in other categories as well.

Bear Case: The tyre industry is a volatile sector with margins swinging by 500bps in years of raw material inflation. CEAT’s net debt was Rs 1,900 crore as of September 24. "Even if CEAT were to post a healthy EBITDA margin of 12.5 percent in FY26E, net debt-to-EBITDA would inch up to 2x," said Elara Securities India.

(With inputs from Zoya and Vaibhavi)