Markets: Amid US-China trade war, RBI’s rate-cut, bourses get bruises, again
Virendra Pandit
New Delhi: As US President Donald Trump and his Chinese counterpart Xi Jinping intensified their ongoing trade war, India’s central bank cut interest rates and tried to provide some relief to home and automobile loanees, while the volatile equity markets ended, again, in the red, the media reported on Wednesday.
Hours after President Trump slapped an astonishing 104 percent tariff on Chinese products, the Indian equity markets traded almost flat on Wednesday as cautious investors anticipated the Reserve Bank of India’s rate cut against the backdrop of escalating global trade tensions. The RBI lowered its key policy rate by 25 basis points to 6 percent and shifted its stance from “neutral” to “accommodative,” signalling a growth-focused approach.
As trading ended, the benchmark BSE Sensex lost 0.51 percent or 379.93 points to close at 73847.15 while Nifty50 was down 0.61 percent or 136.70 points to close at 22399.15. The broader market showed weakness, with 2,425 stocks declining, against 1,248 advances on the BSE.
RBI Governor Sanjay Malhotra revised downward the FY26 growth forecasts to 6.5 percent from the earlier 6.7 percent, and reduced inflation projections to 4 percent from 4.2 percent. The policy shift acknowledged mounting global headwinds, particularly from the escalating US-China trade dispute.
The six-member interest rate-setting Monetary Policy Committee (MPC) of the RBI on Wednesday voted unanimously to cut the policy repo rate by 25 basis points (bps) from 6.25 percent to 6 per cent to support growth, which could face headwinds from the ongoing global tariff war. It came in the backdrop of the latest retail inflation reading coming in below the 4 percent target.
Malhotra observed that there is greater confidence about alignment of retail inflation with the 4 percent target over 12 months.
Along with the rate cut, the MPC also voted unanimously to change the monetary policy stance from “neutral” to “accommodative”.
The MPC had cut the repo rate at its last meeting in February too by 25 bps from 6.50 percent to 6.25 percent. The latest repo rate cut came as the headline CPI or retail inflation moderated to a seven-month low and GDP growth picked up.
The CPI declined to 3.6 percent in February 2025 from 4.3 percent in January as food prices, especially vegetables, recorded a sharp decline driven by the arrival of winter crops in the market. The Real GDP picked up pace in the third quarter (October-December 2024), growing 6.2 percent against 5.6 percent in the previous quarter.
State Bank of India’s economic research department expects a cumulative policy rate reduction of 75-100 basis points by March 2026, factoring in the average inflation envisaged and the output gap consequent upon different GDP scenarios, the reports said.
On Wednesday, the IT stocks dragged, and banking and NBFCs reacted to the RBI’s rate-cut. Banking stocks fell, including NBFCs Cholamandalam, IIFL Finance, Muthoot Finance, and Manappuram Finance as the RBI revised repo rate and aims to issue comprehensive regulations on prudential norms for gold loans.
Shares of Nestle India, Hindustan Unilever, Hero Motocorp, Titan and Tata Consumer Products traded among major gainers, while Wipro, Trent, Infosys, Tech Mahindra and Tata Steel depreciated. The broader benchmark indices continued to trade lower amid global trade tensions.
Public sector banks such as Indian Bank, Bank of Baroda, Union Bank of India and Canara Bank depreciated 2 percent.
