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Governor Sanjay Malhotra-led RBI Monetary Policy Committee (MPC) announced to keep the repo rates unchanged at 5.5 per cent on Wednesday, August 6. Following the announcement, the Sensex ended 166.26 points lower at 80,543.99 while the Nifty fell 75.35 points to settle at 24,574.20.

The Reserve Bank of India's MPC voted unanimously to keep the benchmark policy rate unchanged and maintain the monetary policy stance at 'Neutral', RBI Governor Sanjay Malhotra said in the post-policy address. The decision was widely in line with market expectations, following a 50 basis point rate cut in the previous meeting, which had taken many by surprise.

Governor Malhotra reiterated that the shift to a 'neutral' stance reflects the central bank’s flexibility to act in either direction based on incoming data. Despite the short-term variability, Malhotra expressed confidence in India's economic trajectory. “Over the medium term, the Indian economy holds bright prospects in the changing world order, drawing on its inherent strength, robust fundamentals and comfortable buffers,” he said.

The RBI Governor stated that retail inflation is expected to rise in the final quarter of FY2026, aligning with analyst forecasts. However, core inflation is projected to remain stable around the 4 per cent mark. Reflecting signs of easing price pressures, the RBI has revised its Consumer Price Index (CPI) inflation projections downward for most of FY26. The headline inflation estimate for the full fiscal year has been cut to 3.1 per cent from the earlier 3.7 per cent. RBI also retained its real GDP growth forecast for the current financial year at 6.5 per cent.

"The MPC’s unanimous decision to keep the repo rate unchanged at 5.5% even while reducing the CPI inflation forecast to 3.1% for FY 26 from 3.7% earlier can be described as a ‘dovish pause.’ Downtrending inflating in the backdrop of a good monsoon and Kharif sowing will keep inflation well anchored, enabling the MPC to go for another rate cut in this rate-cutting cycle. The RBI Governor’s view that “we are waiting for the transmission of front-loaded rate cut” is the right view under the present circumstances. This policy of dovish pause while continuing with the neutral policy stance is good for the banking and other rate-sensitive sectors," said V K Vijayakumar, Chief Investment Strategist, Geojit Investments.

Broader markets underperformed benchmark indices, with the Nifty Midcap down 0.8 percent and Nifty Smallcap indices down over 1 percent.

Among stocks, Asian Paints, HDFC Life, M&M, BEL and Coal India were among the top gainers in the Nifty 50 index, while Wipro, Sun Pharma, Jio Financial, Tech Mahindra and IndusInd Bank were among the top laggards.

Rate-sensitive sectors were mixed post the RBI announcement, with the Nifty Bank and Nifty Financial Services ended flat while Nifty Auto and Nifty Realty declined 0.53 per cent and 1.5 per cent, respectively.

In the Nifty Bank index, Canara Bank, Federal Bank, SBI, HDFC Bank, Bank of Baroda, PNB, and Kotak Bank were in the green while the remaining constituents were in the red. IndusInd Bank fell the most, down 2 per cent, followed by AU Small Finance Bank and IDFC First Bank, down over 0.5 percent each.

"For banks, the repo rate cut impact was visible in Q1 and we will see a continued impact in Q2. For now, NIMs seem to be bottoming out in Q2. Banks are expected to see margin improvement over H2, with deposit repricing playing out and some support from the CRR cut announced in the Jun’25 MPC meeting. Asset quality challenges in the unsecured segments appear to be settling, however, banks have flagged emerging challenges in certain segments vis-à-vis SME and CVs. Thus, the near-term outlook for banks continues to remain challenging. However, expectations of a healthy festive season, improving consumption demand and pick-up in economic activity should act as catalyst for credit growth uptick. In our view, RoAs for banks are likely to bottom-out in FY26," said Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS.

Meanwhile, in the Auto index, Bosch was the top drag, down 6 per cent, followed by Balkrishna Industries, down 5.7 per cent, and Motherson, down over 2 per cent. Bharat Forge, Hero Moto, and Exide Industries, also shed over a per cent each. However, TI India, M&M and MRF were in the green.

Finally, in the realty segment, all constituents, except one (Raymond) were in the red. Anant Raj was the top loser, down over 3 per cent, followed by Godrej Properties, Brigade, DLF, and Phoenix, down over 2 per cent each.

“The RBI’s decision to maintain the current policy rate reflects its continued focus on inflation management and financial stability. From a real estate perspective, this stability supports sustained buyer confidence, especially in the mid‐ to premium housing segments where purchase intent remains strong. While consumers were hoping for a rate cut to ease home loan EMIs, the unchanged stance ensures affordability doesn’t worsen — thereby keeping demand for residential real estate intact. For now, policy continuity bodes well for both homebuyers and developers by providing a predictable environment for decision‐making and long‐term planning, said Sudhir Pai, CEO, Magicbricks.

Among other sectors, Nifty IT and Nifty Pharma lost 1.7 percent and 2 percent, respectively, while Nifty FMCG and Nifty Metal shed around 0.9 percent and 0.4 percent, respectively.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.

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