RBI rate decision today, here's how to play the FD window

Experts advised investors to prioritise capital safety and stable returns as interest rates are expected to stay steady.

• RBI likely to keep repo rate unchanged at 5.25% in upcoming policy meeting
• Global uncertainty and volatile capital flows cited as reasons for rate pause
• Investors advised to lock in current fixed deposit rates for stable returns

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The RBI Monetary Policy Committee (MPC) is widely expected to hold key rates steady on February 6, maintaining the repo rate at 5.25 percent. For investors, the pause may be a good time to lock in fixed deposit rates pre-empting more cuts down the line.

Nilesh Choudhary, Founder and CEO, Aikyam Capital Group, said, “We think the upcoming MPC decision is pivotal for market functioning. A pause in the repo rate would indicate the RBI’s intentions to consolidate the impact of earlier rate easing while prioritising liquidity management and bond market stability."

Since the last policy in December, India has sealed trade deals with the EU and the US, which would reduce tariffs on Indian goods to 18 percent from 50 percent. From the highest tariffs, Indian goods will now be taxed at up to 18 percent in the US, among the lowest rates for Asian countries, which will help in improving export competitiveness

“Global economy continues to remain uncertain. Our Geo-Economics Stress Index shows that heightened uncertainty leads to economic stress with a 3-4 month lag. Elsewhere, metal prices have recovered after witnessing a significant sell-off last week,” an SBI research report said.

The global uncertainty and recent movements in bond yields reduce the case for any immediate policy change, it said.

“...We observe that despite policy rate easing, government bond yields have exhibited persistent hardening in recent periods. We believe that the choice of eligible securities itself may influence the effectiveness of OMO operations, even when the aggregate quantum of liquidity injection is unchanged. RBI is thus likely to maintain the status quo in the upcoming policy," the report said.

Market experts share similar views, citing external risks and volatile capital flows as key concerns ahead of the policy decision.

Vinayak Magotra, Product Head and Founding Team, Centricity WealthTech, said the RBI would likely keep rates unchanged. Global conditions remain uncertain, particularly with respect to capital flows, currency movements, and evolving external risks. “Against the backdrop of record capital outflows, any further rate cuts could potentially spur repatriation of rate-sensitive flows," he said.

Others in the financial sector also cited domestic fiscal priorities and policy transmission as reasons to be cautious about rate cuts.

Saurabh Jain, Co-founder and CEO, Stable Money, said based on the Budget’s key focus areas, including continued fiscal support for growth alongside a disciplined approach to public finances, he didn’t expect an immediate rate cut.

"The focus, for now, is likely to remain on liquidity management and assessing the transmission of past easing rather than on lowering rates immediately," he said.

What investors can do

Experts advised investors to prioritise capital safety and stable returns, as interest rates are expected to stay steady.

"For investors, this pause in monetary easing presents a solid opportunity to lock in prevailing fixed deposit rates before any future rate adjustments. Several small finance banks and niche lenders continue to offer attractive FD rates. For example, Slice SF Bank and Utkarsh Bank are offering around 7.5–7.75% for tenures of under two years, making FDs a compelling option for stable returns," said Jain.