RBI Raises FY27 GDP Forecast to 6.7%, Cuts Inflation Estimate to 5%; Stable Policy Boosts Investor Confidence Amid Global Uncertainty

Indian equity markets witnessed strong buying interest on Wednesday after the Reserve Bank of India (RBI) maintained the benchmark repo rate at 5.25% while retaining its neutral monetary policy stance, a decision that was largely in line with market expectations. The central bank's revised macroeconomic projections, including a higher growth forecast and a lower inflation estimate for FY27, provided a fresh boost to investor sentiment, pushing benchmark indices into positive territory.

The policy announcement was interpreted as a sign of confidence in the resilience of the Indian economy despite ongoing global uncertainties. Investors responded positively, with buying seen across interest rate-sensitive sectors such as real estate, automobiles, and banking.

Sensex Nears 78,800; Nifty Holds Above 24,600

Following the RBI's policy announcement, the BSE Sensex climbed over 340 points to trade around 78,775, while the Nifty 50 remained comfortably above the 24,600 mark. The rally was supported by broad-based buying, indicating that market participants welcomed the central bank's balanced approach towards growth and inflation.

The broader market also remained firm. The Nifty MidCap Index advanced around 0.3%, while the Nifty SmallCap Index gained nearly 0.9%, reflecting continued investor interest in mid-sized and smaller companies.

Market breadth remained positive, with advancing stocks significantly outnumbering declining shares on both major exchanges.

RBI Maintains Status Quo, Improves Economic Outlook

The Monetary Policy Committee (MPC), led by RBI Governor Sanjay Malhotra, unanimously voted to keep the repo rate unchanged at 5.25%, maintaining the current policy stance.

While announcing the policy decision, the Governor noted that core inflation is expected to remain moderate, although headline inflation could witness temporary pressure due to supply-side factors and may peak during the third quarter of FY27.

The RBI also revised its macroeconomic forecasts:

• FY27 GDP Growth: Increased to 6.7% from the earlier estimate of 6.6%

• FY27 CPI Inflation: Reduced to 5.0% from 5.1%

The revised projections suggest that the central bank expects economic activity to remain resilient while inflation gradually moves towards a more comfortable range.

Realty Stocks Outperform as Stable Rates Support Housing Demand

The biggest beneficiaries of the RBI's policy decision were real estate stocks.

The Nifty Realty Index surged nearly 2.5%, emerging as the top-performing sector during the session. Investors believe that stable borrowing costs will continue to support residential housing demand, commercial real estate investments, and financing activity across the property sector.

Real estate developers are expected to benefit from sustained home loan affordability, while improving economic growth could further strengthen demand across major urban markets.

Industry experts also believe that policy continuity provides greater visibility for long-term investment decisions in the sector.

Auto and PSU Banks Extend Gains

Automobile shares also attracted strong buying following the policy announcement.

Companies such as Bosch, Exide Industries, and Sona BLW Precision Forgings featured among the top gainers in the Nifty Auto Index as investors anticipated steady vehicle financing demand supported by unchanged interest rates.

Public sector banking stocks also traded higher, reflecting expectations that a stable interest rate environment would help preserve credit growth while maintaining asset quality.

On the other hand, defensive sectors including FMCG and Pharma underperformed the broader market as investors shifted towards cyclical and growth-oriented sectors.

Bond Market and Rupee React Positively

The fixed-income market also responded favourably to the RBI's policy.

India's benchmark 10-year government bond yield declined to around 6.76%, compared to approximately 6.82% in the previous session, indicating improved confidence among bond investors.

Meanwhile, the Indian rupee strengthened to around 95.03 against the US dollar, recovering after recent weakness as the policy reinforced expectations of macroeconomic stability.

Governor Malhotra stated that the measures announced earlier to encourage capital inflows are expected to strengthen India's balance of payments. He also highlighted that India's foreign exchange reserves remain comfortable, providing approximately 10 months of import cover while covering nearly 91% of the country's external debt obligations.

RBI Announces Measures for Cooperative Banking Sector

Apart from monetary policy, the RBI unveiled additional measures aimed at strengthening the cooperative banking ecosystem.

The central bank announced:

• Resumption of licensing guidelines for Urban Cooperative Banks.

• Draft directions for Rural Cooperative Banks to improve governance and operational efficiency.

These initiatives are expected to improve financial inclusion and strengthen the cooperative banking framework over the medium term.

Corporate Earnings Remain the Next Major Trigger

Investor attention now shifts towards a busy earnings calendar, with several prominent companies scheduled to announce their June quarter results.

Key companies reporting Q1 FY27 earnings include:

• Power Grid Corporation

• PB Fintech

• Berger Paints India

• Biocon

• Cummins India

• Whirlpool of India

• Navin Fluorine International

• Aurobindo Pharma

• Bayer CropScience

• Gujarat Narmada Valley Fertilizers & Chemicals

• GMM Pfaudler

• Paisalo Digital

• Shree Renuka Sugars

• JK Lakshmi Cement

• Kirloskar Ferrous Industries

The earnings announcements are expected to drive stock-specific action throughout the trading session and could influence broader market sentiment in the coming days.

Market Experts View Policy as Equity Positive

Market participants broadly interpreted the RBI's decision as supportive for financial markets.

The combination of stable interest rates, improved GDP growth expectations, easing inflation projections, and healthy external sector indicators reinforces confidence in India's economic outlook.

Analysts believe the RBI has struck a balance between supporting growth and maintaining inflation discipline, giving investors greater clarity regarding the monetary policy path over the coming quarters.

Market Outlook

The RBI's latest monetary policy has reinforced confidence in the Indian economy by maintaining policy stability while improving its growth outlook and lowering inflation expectations. The decision is expected to remain supportive for banking, financial services, real estate, automobiles, infrastructure, and capital goods companies in the near term.

Going forward, market direction will largely depend on Q1 FY27 corporate earnings, foreign institutional investor (FII) flows, global interest rate expectations, crude oil prices, currency movements, and upcoming domestic macroeconomic data. While the broader outlook remains constructive, investors should expect increased stock-specific volatility during the ongoing earnings season as companies report their quarterly performance.