SBI expects RBI to hold rates in December, turns bullish on Nifty 500 stocks

India's strong Q2 GDP data and evolving macroeconomic scenario could push the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) to maintain a status quo on benchmark interest rates in its December policy meeting, according to State Bank of India (SBI).

Noting resilient growth and low inflationary trends, the RBI MPC has been keeping the repo rates steady for the last two consecutive meetings- in August and in October- after cutting rates by 50 basis points in June.

At present, with strong GDP prints and record low inflation, chances of a rate cut in December have dwindled significantly.

"Expectations built till a few days back of a shallow rate cut of 25 bps appear to have faded as finer readings of the strong Q2 growth print and the evolving playbook make the choice tilted in favour of a pause in December policy," said SBI.

India’s Q2FY26 GDP growth surged to a six-quarter high of 8.2%, while India’s retail inflation plunged to a record low of 0.25% in October.

The RBI MPC meeting will begin on Wednesday, December 3. RBI Governor Sanjay Malhotra will reveal the MPC decision on rates and its assessment of growth and inflation trends on Friday, December 5.

SBI highlighted in its report that monetary policy has entered a phase of pause globally. While the number of rate decisions is still dominated by cuts, they are far fewer in number.

SBI underscored the IMF's projection that global GDP may slow by 10 bps to 3.2% in 2025 on account of rising trade protectionism and uncertainty. Moreover, inflation may stay above target in the US and subdued elsewhere.

"The number of rate decisions, while still dominated by cuts, is far less in 2025 than in 2024. A broader trend is that monetary policy has entered a phase of pause with differences across geographies," said SBI.

Nifty 500 outlook bullish

SBI finds concentration risk on the rise in the S&P 500, but the Nifty 500 looks better represented due to the representation of diverse sectors.

"Nearly 40% weightage lopsidedly occupied by the top 10 guns in S&P 500. While the index is at an all-time high and market monks are batting for the 8,000 level for the calendar year 2026, the evolving signals from the non-tech, non-financial sector are neither upbeat nor reassuring," said SBI.

"The Nifty 500, in comparison, looks better represented through a wide variety of firms from diverse sectors whose cumulative weightage together comes at nearly 25%, cushioning from the likely buildup of sectoral concentration risk," said the financial firm.

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