The Reserve Bank of India (RBI)-appointed Monetary Policy Committee (MPC) unanimously kept the repo rate unchanged at 5.25 per cent at its August 2026 meeting, with the decision largely in line with market expectations. According to Business Standard, the MPC meeting for the 62nd time under RBI Governor Sanjay Malhotra voted unanimously on August 5, 2026 to maintain the policy stance as 'Neutral'. The Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) rates were left untouched at 5 per cent and 5.5 per cent, respectively. The committee cited resilient domestic growth, rising inflationary pressures and an uncertain global environment as key factors influencing their decision. With headline inflation creeping above the 4% target in June 2026, after 16 consecutive months below it, the MPC had little room to move in either direction without more clarity. Governor Sanjay Malhotra's statement has not given any forward guidance as the outlook is "hazy" due to uncertainties regarding the south-west monsoon, El Niño, geopolitics and global trade policy. The MPC noted that risks are evenly balanced compared to earlier projections of downside risks.
The RBI has raised its FY27 GDP growth forecast by 10 basis points to 6.7% with significant revisions across quarters. As per Business Standard, the first quarter GDP growth projection has been raised 40 bps to 7.0% and second quarter by 10 bps to 6.4%, compared with the RBI's June estimate. The growth estimate remains unchanged at 6.5% for the third quarter and 6.8% in the fourth quarter. For FY28, the first quarter growth of FY28 is estimated at 7.3%. The central bank has dropped the inflation forecast by identical margin to 5.0% for FY27, with second quarter inflation estimate revised downwards by 40 bps to 4.7%. The projection for the third quarter has been left unchanged at 5.9% while fourth quarter estimate has been raised by 10 basis points to 5.5%. The first quarter inflation came in at 3.9%, lower than the RBI's June estimate of 4.2%. The MPC noted that headline CPI inflation rose to 4.4% in June 2026, driven primarily by food and fuel, coming in about 30 basis points lower than its earlier projection for Q1FY27. Core inflation, which strips out food and fuel, held steady at 3.9% during May-June, while core inflation excluding precious metals remained even lower, at 2.3 to 2.5%. The committee believes the expected rise in headline inflation is largely supply-driven rather than the result of broad-based demand pressures.
As reported by Business Standard, the Nifty Realty surged nearly 3 per cent, followed by the Nifty Auto index (up over 1 per cent) following the RBI policy announcement. Analysts believe that chances of a near-term rate hike seem lower, unless there is a sharp spike in inflation. Sameer Sawant, Research Analyst at Mirae Asset Sharekhan notes that "We believe chances of immediate rate hike have abated. That said, given the fluid geopolitical and monsoon-related risks flagged by the MPC, we believe RBI will stay watchful, and a hike cannot be entirely ruled out should inflation surprise meaningfully on the upside through H2FY27." The back and forth in the U.S.-Iran conflict, which has led to volatility in crude oil prices, has also complicated the central bank's task of balancing growth with price stability. The sudden drop in the Brent Crude price (from $95 a barrel to $79 a barrel, in past fortnight) and the massive flow of NRI deposits have created a cushion for the RBI - it doesn't need to be in a hurry to hike the policy rate, it seems, unless the external circumstances dramatically change for the worse. Post policy, the overnight index swap (OIS) market is pricing in 2.5 rate hikes in the next 12 months, down from 3 hikes before the policy announcement. A real rate, commonly referred to as real interest rate or real rate of return, is a financial metric that looks at the rate adjusted for inflation to reflect the true change in purchasing power. Inflation, as estimated, is expected to be 5.9% and 5.6% respectively in quarter three and four while the policy rate is 5.25%.
According to Teji Mandi's Jatin Gedia, the Bank Nifty has been consolidating between 58,500 and 56,500 for the past six weeks. As reported by Business Standard, Gedia notes that the Bollinger Bands are contracting suggesting range-bound price action between 57,100 (20-day moving average) and 58,500 which is the previous swing high. The analyst believes that the overall trend remains positive and the current consolidation phase is a brief pause in the up move. For trading strategy, he recommends traders can look to buy on dips near the support zone of 57,100-57,000 for an up move towards the upper end (58,500) of the range, cautioning that the bullish structure shall deteriorate in case the index falls below 56,500.
According to Teji Mandi's Jatin Gedia, the Nifty Auto witnessed a steady up move after breakout from the 27,500-27,700 resistance zones. As reported by Business Standard, presently, the index surpassed the Jan 2026 High of 29,180 indicating further upside and continuation of the positive momentum towards 30,400 which is the monthly upper Bollinger Band. The analyst adds that the support base has shifted higher to 28,500-28,300 zone. For the Nifty Realty, Gedia believes that Bank Nifty and Nifty Realty are in a consolidation phase, with the index showing positive momentum in recent trading sessions. The Nifty Realty is currently at 907 level and surged nearly 3 per cent following the RBI policy announcement.
