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The Reserve Bank of India on Friday kept the key policy rate unchanged at 5.25 per cent, pausing after a series of reductions amid geopolitical uncertainties and currency volatility.

This was the first monetary policy review after Finance Minister Nirmala Sitharaman presented the Budget for the financial year 2026-27. The central bank maintained a neutral stance, citing low retail inflation and steady economic growth.

Stock markets showed mixed trends after the RBI’s policy announcement. The BSE Sensex fell 202.53 points, or 0.24 per cent, to 83,111.40, while the Nifty 50 declined 91.70 points, or 0.36 per cent, to 25,551.10.

Among sectoral indices, FMCG gained 1.69 per cent, private banks rose 0.51 per cent, and Nifty Realty was up 0.11 per cent. IT fell 1.83 per cent, pharma declined 1.02 per cent, PSU banks lost 1.03 per cent, and mid-small cap indices dropped 1.09 per cent. Nifty Auto fell 0.54 per cent, Nifty Bank declined 0.17 per cent, and Nifty Metal slipped 0.35 per cent.

In individual stocks, ITC led gains, rising 5.40 per cent, followed by Kotak Mahindra Bank up 3.47 per cent, Bharti Airtel 1.90 per cent, and Bajaj Finance 1.88 per cent. Hindustan Unilever gained 0.96 per cent, Axis Bank 0.92 per cent, and Power Grid 0.78 per cent.

Among other major shares, Maruti rose 0.32 per cent, Titan 0.31 per cent, ICICI Bank 0.25 per cent, Bajaj Finserv 0.12 per cent, and L&T 0.10 per cent.

On the downside, Tech Mahindra fell 1.59 per cent, TCS 1.98 per cent, Infosys 1.05 per cent, HCL Technologies 1.36 per cent, and Adani Ports 1.38 per cent.

Asian Paints declined 1.33 per cent, NTPC 1.17 per cent, SBI 1.26 per cent, Ultra Cement 0.50 per cent, Sun Pharma 0.39 per cent, and BEL 0.29 per cent.

The cautious sentiment was influenced by currency weakness. The rupee fell past 92 against the US dollar last week, raising concerns over higher import costs and possible inflationary pressure. Analysts said strong GDP growth and robust foreign exchange reserves provided support to markets.

Since February 2025, the RBI has cut the repo rate by 125 basis points. Reductions included 25 basis points each in February and April, 50 basis points in June, and 25 basis points in December. The pause in Friday’s policy came after retail inflation remained below the 2 per cent lower band set by the government for four months.

India’s GDP growth was 8.2 per cent in the second quarter, above expectations. RBI Governor Sanjay Malhotra said the central bank will monitor inflation and growth. The government has tasked the RBI to keep CPI-based inflation at 4 per cent, with a margin of 2 per cent on either side.

Gurmeet Chaddha of Complete Circle Wealth described the RBI monetary policy as “slightly neutral to negative” from a market perspective. He said, “One concern is that neither the budget nor RBI policy mentioned capital outflows. There is a disconnect between the real economy and capital markets.”

Chaddha noted that while credit measures and FDI inflows are positive, bond yields need more attention. “Communication in bond and currency markets needs improvement,” he added.

On small finance banks, he said the increase in collateral-free loans from Rs 10 lakh to Rs 20 lakh is “positive” and will support lending. He added that overall credit growth in BFSI is improving, with NPAs under control, making the sector “generally good” for the market.

On banking stocks after the policy, Chaddha said, “We remain constructive on private banks. HDFC Bank’s valuation is reasonable, and its earnings momentum is good. Credit growth is picking up, and NBFCs like Shriram, Chola and Pune-based lenders look constructive.”

He cautioned that capital market plays may see some impact due to STT changes, but AMC inflows and gold-silver inflows remain healthy.