RBI monetary policy today: No rate cut likely, markets focus on growth-inflation outlook; here’s how Nifty may trade

Market participants expect no rate cut today, but any unexpected policy change could drive volatility.

Markets are closely watching the Reserve Bank of India's (RBI) monetary policy announcement today, largely expecting the central bank to maintain the repo rate at 6.5 percent. However, the market participants are also keenly watching for signals on future inflation and liquidity measures, and any surprise rate cut, which could trigger a sharp rise in stocks.

If the RBI decides to keep the repo rate steady in today's monetary policy, if would mark the tenth consecutive meeting with no change, as the central bank balances inflation control with supporting economic growth.

A poll by Moneycontrol of 12 economists, bankers, and fund managers showed that the consensus is for the RBI’s Monetary Policy Committee (MPC) to keep the key interest rates unchanged. This is in line with the broader market sentiment that the central bank will prioritise managing inflation and maintaining liquidity rather than pushing for further rate cuts.

Naveen Kulkarni, Chief Investment Officer at Axis Securities, shared a similar outlook, saying that while the RBI may keep rates on hold, its forward guidance will be crucial. “The key will be how the RBI navigates between inflation control and growth revival in the current environment,” he said. Kulkarni added that any commentary on inflation trends and liquidity management will be closely scrutinised by market participants.

However, a few indicators are generating speculation about potential surprises. Ashish Kyal, Founder and CEO of Waves Strategy Advisors, pointed out that the 1-year bond chart suggests a possible 25 basis points rate cut. Kyal said that such a surprise move, if it happens, could lead to sharp short covering in the markets, potentially pushing the Nifty above key resistance levels.

The Nifty closed above the 25,000 mark on Tuesday, 8 October, signalling a potential short-term pullback. According to Kyal, a break above the 25,080 level could resume a positive trend towards 25,140, followed by 25,290, with immediate support at 24,920. Traders are advised to create long positions above 25,080 with a stop-loss at 24,940 and a target of 25,290.

While market participants generally expect no rate cut, any unexpected policy change could drive volatility. The RBI’s forward guidance on inflation, growth prospects, and liquidity conditions will be closely monitored for signals of future policy direction.

The RBI policy later today comes in the backdrop of the US Federal Reserve recently cutting its benchmark rate by 50 basis points, bringing the federal funds target range to 4.75-5 percent. This move marked the start of the Fed’s easing cycle, aimed at countering the economic slowdown in the US. The Fed's rate cut has heightened expectations of further easing globally, which may also influence the RBI’s policy stance.

In the last one week, the markets have seen some correction, with the benchmark indices Nifty and Sensex slipping about 4-5 percent amid geopolitical tensions. Key sectoral indices such as the Nifty IT, Nifty FMCG and Nifty Bank have also seen a 3-5 percent fall.

Markets may remain steady in case the RBI opts to maintain the current repo rate, as is expected; but any hints regarding inflationary risks or liquidity measures could influence stock and bond prices.

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