There has been a favourable shift in India’s macroeconomic landscape, with several core sectors likely to gain momentum amid declining interest rates, according to a recent report by Nexedge Research. The report states that sectors such as banking, non-banking financial companies (NBFCs), real estate, and automobiles stand to benefit significantly from the current policy environment marked by lower borrowing costs.
"Banking, NBFCs, real estate, and automobiles are well-positioned to benefit from lower borrowing costs," the report said, indicating that these interest rate-sensitive sectors could see a revival in credit demand, reduced cost of capital, and an uptick in consumption.
The analysis highlights that India is entering a phase of stable inflation and improved liquidity. This environment, reinforced by a sustained decline in money market rates and the softening of long-term government bond yields, is creating more attractive conditions for both lenders and borrowers.
"Money market rates and bond yields are trending lower, with the 10-year G-sec yield already softening, boosting bond prices and supporting fixed-income returns," the report noted. The rally in bond prices is translating into better returns for fixed-income investors, a trend that is likely to persist if inflation remains subdued.
Easing Inflation
Inflation, currently hovering near the lower bound of the Reserve Bank of India’s (RBI) target range of 2–6 per cent, adds to the optimism. The RBI’s neutral stance on policy further opens up the potential for additional rate cuts, enhancing the outlook for debt and equity markets alike.
In a move that exceeded market expectations, the RBI’s Monetary Policy Committee slashed the repo rate by 50 basis points to 5.50 per cent on Friday, its third consecutive cut in 2025, amounting to 100 basis points of easing since February. Alongside this, the central bank adjusted the Standing Deposit Facility (SDF) rate to 5.25 per cent, while setting the Marginal Standing Facility (MSF) rate and the Bank Rate at 5.75 per cent.
Additionally, to further support systemic liquidity, the RBI announced a phased reduction in the Cash Reserve Ratio (CRR) from 4 per cent to 3 per cent. This measure, rolling out in stages through September to November 2025, is expected to inject approximately Rs 2.5 trillion into the banking system, enhancing credit availability and supporting growth in the real economy.
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