RBI Surprises With Aggressive Easing, But Markets Stay Cautious
Despite the RBI’s bold policy moves earlier this month — including a 50 bps repo rate cut and a sharper-than-expected 100 bps CRR cut to 3% — Indian equity markets remain range-bound. Valuations are stretched, and earnings delivery has been underwhelming, especially on the revenue front.
Weak urban consumption trends and muted private capex continue to weigh on topline growth. Liquidity has improved, but credit growth is yet to show meaningful traction. Meanwhile, margin pressures persist for capital goods players, and demand recovery in IT remains sluggish.
The Nifty 50 reported a modest 3.7% YoY growth in net profits, a sharp deceleration from the 15%+ CAGR seen over FY20–FY24.
Rate-Sensitive Sectors Fail to Cheer RBI Moves
Even after three straight rate cuts, including the latest 50 bps cut to 5.50% on June 6, traditional rate-sensitive sectors like real estate, autos, consumer durables, and financials have largely underperformed.
Interestingly, tech stocks have emerged as relative outperformers, aided by hopes of a pickup in U.S. demand and limited impact from global trade headwinds.
Typically, lower rates spur demand across housing, auto, and banking by improving affordability and boosting loan offtake. However, these transmission effects are yet to be fully reflected in sector performance, suggesting lingering concerns around broader economic momentum.