RBI Sticking To Expectations Is Positive In Uncertain Times, Says Moody's Katrina Ell

The Reserve Bank of India delivering a rate cut and changed stance, in line with market expectations, is positive as people do not want any more surprises right now, Moody's Analytics Economic Research Director, Katrina Ell, said.

Uncertainty has a major negative impact in economies and the effect is pervasive. From last week, bond, currency, and equity markets have witnessed unpredictable moves because of US tariff threats. So, introducing more volatilities at this point was the last thing the central bank wanted to do, she added.

RBI cut the benchmark repo rate by 25 basis points to 6% in its April policy meeting. Members of Monetary Policy Committee voted unanimously to lower the repo rate and change the stance to 'accommodative' from 'neutral'.

The fact that RBI changed the stance to accommodative indicates more easing is possible going forward. Now, Moody's expects a cumulative rate cut of 75 basis points in calendar year 2025. The door has opened for more easing, depending on how conditions are, Ell said.

The change in RBI's stance indicates that when global situation turns very volatile, there will likely be a policy response. The response may come in the form of providing ample liquidity or more rate cuts, according to Madhavi Arora, lead economist, Emkay Global Research. She sees uncertainty becoming a theme.

On Monday, India's benchmark indices NSE Nifty 50 and BSE Sensex ended at a 10-month low and Rs 14 lakh crore worth investors' wealth was wiped out. The markets rose on Tuesday, but failed to recover losses.

On Wednesday, the Nifty 50 and Sensex were trading lower, as 26% US tariff on India came into effect. The indices were trading 0.60% and 0.45% down as of 10:57 a.m.

The Indian currency declined 67 paise to 86.67 against the US dollar, the lowest level since March 19 in Wednesday's session. The benchmark yield on the 10-year bond opened flat at 6.48% and rose 6 basis points to the day's high of 6.54%.