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  • ‘RBI’s Policy Shift Brings Relief to Bond Markets’: Experts Ananlyse RBI’s New Monetary Policy

‘RBI’s Policy Shift Brings Relief to Bond Markets’: Experts Ananlyse RBI’s New Monetary Policy

The Reserve Bank of India’s latest monetary policy decision has sparked optimism among bond market players, with many calling it a clear sign that the central bank is turning more dovish. One of them is Devang Shah from Axis Mutual Fund, who believes the RBI has delivered exactly what the market had been hoping for.

‘RBI’s Policy Shift Brings Relief to Bond Markets’: Experts Ananlyse RBI’s New Monetary Policy

RBI's monetary policy decision sparked optimism among bond market players, with many calling it clear sign that central bank is turning dovish


The Reserve Bank of India’s latest monetary policy decision has sparked optimism among bond market players, with many calling it a clear sign that the central bank is turning more dovish. One of them is Devang Shah from Axis Mutual Fund, who believes the RBI has delivered exactly what the market had been hoping for.

A Welcome Signal for the Bond Market

Speaking after the policy announcement, Shah said the tone of the RBI’s messaging showed a clear shift toward a softer, more accommodative approach — one that’s likely to cheer bond investors.

“Our view is yes, it is definitely dovish and markets would be happy with this, bond market specifically, because they have delivered what bond markets wanted,” he said.

The central bank’s decision to revise both growth and inflation forecasts downward, along with its steps to improve banking system liquidity, has set the stage for possible rate cuts going forward, he added.

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Growth and Inflation Both Moved Lower

Shah pointed out that the RBI has acknowledged a slowdown in the economy by trimming its growth estimate, while also easing its inflation forecast. This dual shift — slower growth and softer inflation — often opens the door for rate cuts in the months ahead.

“See, our perspective is clearly RBI has probably signalled a significant dovish tone. RBI has delivered what markets wanted. There is a significant revision in the growth. Growth has been revised downwards. Inflation has been revised downwards,” he said.

He also noted that unlike last year, when liquidity in the banking system was tight, the situation has now improved. “They have taken very-very proactive steps in ensuring that banking liquidity goes into surplus,” Shah added.

Room for More Cuts in the Coming Months

The RBI’s updated policy stance and its decision to cut rates by 25 basis points have raised hopes that more cuts could be on the horizon.

“Today if I look across at the market environment, the banking liquidity is significantly positive and we believe that today’s RBI’s message where they have changed the stance, delivered 25 basis rate cuts, opens up some more space for monetary policy easing,” said Shah.

He believes that if current economic conditions continue — particularly weaker demand and lower prices — another 25 to 50 basis point cut is possible in the near term.

Where Are Bond Yields Headed?

With the RBI shifting gears, the focus now turns to the bond market, especially the 10-year yield. Shah sees yields trending lower in the next few months as investors respond to the softer policy outlook.

“If I actually look across today’s RBI policy, as per us also probably, RBI has delivered everything what markets wanted. Markets were looking out for some bit of change in stance,” he explained.

He said the Governor has also signaled that the next move could either be a rate cut or a pause, depending on how things evolve globally and locally.

“Markets were looking out for a policy rate cut and markets were looking at the direction. I think Sanjay Malhotra, Governor, has actually spelt out quite clearly the next move can be lower or a pause,” Shah said.

Global Pressures Still Loom

Despite the optimism, Shah warned that global factors — like rising U.S. bond yields and fluctuations in the rupee — could still affect how much further Indian bond yields can fall.

“Our perspective is that yes, currency is somewhere an important variable which markets will be looking at, not only currency people will also look at what is happening on US bond yields. US bond yields in the last five days are up almost 60 odd basis,” he said.

Even so, he believes India’s domestic economic data points toward a softer yield outlook.

“Both are very-very good recipe for rate cuts. And that is why we believe that there is a possibility that there can be additional 25-50 basis of rate cuts. With those getting pencilled in and today’s dovish policy, bond markets get moved towards a 6.25, 6.40 range in the next three to six months,” he added.

The Road Ahead

Looking forward, Shah expects yields to gradually drift lower, as long as inflation stays in check and economic growth remains subdued.

“Because of the local macros, which is lower growth and lower inflation, yields should start inching lower or trending lower towards 6.40. They can go in the band of 6.25 to 6.40 in the next three to six months,” he said.

The RBI’s latest message may not have been dramatic, but for bond markets, it hit all the right notes — offering clarity, confidence, and possibly, the start of a more supportive policy cycle.

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