Cooling inflation reinforces casefor potential RBI rate cuts: Report

India’s inflation fell to 4.31%in January from 5.22%, approaching the RBI’s 4%target after four months above 5%and this trend reinforces the case for potential rate cuts, with the repo rate at 6.25%, a new report showed on Saturday.

The observed market trajectory suggests a cautious sentiment among investors, potentially influenced by macroeconomic conditions, sector-specific developments, and global financial market trends, according to the Motilal Oswal Mutual Fund report.

The Nifty 500 Index declined by 7.88%in February, reflecting contractions across multiple sectors. Factor-based strategies reflected broader market movement, while fixed-income instruments, including Nifty 5 year Benchmark G-Sec (+0.53%), exhibited relative stability.

Globally, developed markets displayed mixed movements, where Switzerland (+3.47%) and United Kingdom (+3.08%) registered gains, while Japan (-1.38%) showed a contraction, the report mentioned.

The US CPI inflation stood at 3%, reflecting marginal increase from 2.90%in the prior month. Another HSBC report mentioned that India’s long-term outlook remains strong and the investment cycle is projected to be on a medium-term uptrend supported by government investment in infrastructure and manufacturing, pickup in private investments, and a recovery in the real estate cycle.

The HSBC Mutual Fund’s ‘Market Outlook Report 2025’ expects higher private investments in renewable energy and related supply chains, localisation of higher-end technology components, and India becoming a more meaningful part of global supply chains to support faster growth.

The real economy, as of now, has evinced resilience to global developments. “Basis the growth-inflation numbers, the MPC’s last policy action as well as the MPC minutes, we believe the RBI-MPC would deliver another 25 bps cut at its April policy while continuing to stay nimble and flexible on its liquidity strategy,” the report projected.

For a third rate cut, inflation trajectory, monsoon outlook and global developments will possibly be key inputs going into the June policy meeting.