Why Did Markets React Negatively To RBI’s Rate Cut? Garima Kapoor Explains | FMCG, PSU Banks Tank

The stock markets reacted negatively to the RBI’s decision to cut the policy repo rate by 25 basis points, with the FMCG index witnessing a sharp decline. According to Garima Kapoor, Executive Vice President - Economist at Elara Capital, the reaction stems from two key factors. First, traders were anticipating additional liquidity measures, particularly a CRR cut, which did not materialize. Second, the RBI’s decision to maintain a neutral stance, rather than signaling a clear easing cycle, led to uncertainty regarding future rate cuts. Additionally, consumer stocks have been underperforming after the Union Budget, as the market awaits visible signs of a consumption boost. Kapoor believes this is a short-term reaction, as RBI’s liquidity signals over the last 15 days indicate a commitment to ensuring adequate liquidity in the system.