After Budget, Market Focus Shifts to Interest Rates: RBI Likely to Make a Big Announcement on This Date

New Delhi (The Uttam Hindu): After the Union Budget, investors are now turning their attention to the upcoming Monetary Policy Committee (MPC) decision by the Reserve Bank of India (RBI) on February 7. According to a report released on Monday, it is anticipated that the RBI may cut the repo rate by 25 basis points to enhance liquidity in the market. This will be the first MPC meeting under the leadership of newly appointed RBI Governor Sanjay Malhotra.

As per a report by a leading financial services firm, the Union Budget 2025-26 indicates a shift in focus from capital expenditure (capex) to boosting consumption and savings. However, fiscal deficit consolidation remains a priority. Unlike previous years, the budget has opted to encourage consumption and savings instead of solely emphasizing capital expenditure. This decision was influenced by weak consumption trends and a slowing economy. The report highlights that Finance Minister Nirmala Sitharaman has shown flexibility in adjusting fiscal policies to support consumption without resorting to populist measures.

Fiscal discipline has also been maintained in the budget, setting a fiscal deficit target of 4.4% for the financial year 2025-26. The report further states that following the budget announcements, the market’s attention is now shifting to income growth and the upcoming RBI MPC meeting on February 7. According to the report, income growth is expected to remain slow with Nifty’s post-tax earnings projected to grow by 5% in FY25 and 16% in FY26. Large-cap stocks are likely to remain the preferred choice over mid-cap and small-cap stocks. Currently, Nifty is trading at 19.9 times the one-year forward price-to-earnings ratio, while mid-cap and small-cap stocks are trading at a premium compared to Nifty.