India's inflation rate eased to 4.31% in January, down from 5.22%, bringing it closer to the Reserve Bank of India's (RBI) 4% target after four consecutive months of remaining above 5%. This downward trend strengthens the argument for potential rate cuts, with the current repo rate set at 6.25%, according to a new report released on Saturday.
The market's trajectory indicates a cautious stance among investors, likely influenced by macroeconomic factors, sectoral shifts, and global financial trends, as outlined in the Motilal Oswal Mutual Fund report.
The Nifty 500 Index recorded a decline of 7.88% in February, reflecting downturns across various sectors. Factor-based investment strategies mirrored broader market movements, while fixed-income instruments, such as the Nifty 5-Year Benchmark G-Sec, displayed relative stability with a 0.53% increase.
On a global scale, developed markets exhibited mixed performances. While Switzerland (+3.47%) and the United Kingdom (+3.08%) saw gains, Japan experienced a 1.38% decline, as noted in the report.
Meanwhile, the U.S. Consumer Price Index (CPI) inflation rose slightly to 3% from 2.90% in the previous month. Another report from HSBC highlighted India's strong long-term economic outlook, citing an upward trajectory in the investment cycle driven by government spending on infrastructure and manufacturing, rising private investments, and a revival in the real estate sector.
The HSBC Mutual Fund's ‘Market Outlook Report 2025’ anticipates increased private investments in renewable energy, localization of advanced technology components, and India's growing role in global supply chains, all of which are expected to accelerate economic growth.
Despite global uncertainties, India's real economy has demonstrated resilience.
"Based on the latest growth and inflation data, the recent policy decisions by the Monetary Policy Committee (MPC), and its meeting minutes, we anticipate that the RBI-MPC will implement another 25 basis points (bps) rate cut in April, while maintaining a flexible approach to liquidity management," the report projected.
A third rate cut may depend on inflation trends, monsoon forecasts, and global economic developments, which are expected to play a crucial role in the June policy meeting.
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