RBI likely to go for another 25 basis points rate cut on August 6th
By Prime Research | Updated at: Aug 5, 2025 01:12 PM IST
RBI is likely to continue frontloading in its August monetary policy meeting. It is expected to announce a 25 basis points (bps) repo rate cut in the upcoming Monetary Policy Committee (MPC) meeting scheduled from August 4 to 6. The central bank is likely to go for this rate cut in order to give another boost to the Indian economy, that is facing high trade related uncertainties, presently.
The Indian stock market is likely to remain cautious and volatile, largely impacted by the recent announcement of a 25% tariff imposed by the U.S. effective August 7, 2025. This tariff on Indian exports to the U.S. has already weighed heavily on market sentiment, contributing to sharp declines in benchmark indices like the Sensex and Nifty during the previous week. Export-heavy sectors including IT, Pharma, and Auto are expected to continue facing pressure due to tariff-related concerns.
Although this tariff raises concerns about the competitiveness of export-oriented sectors, diplomatic discussions continue with a U.S. delegation expected to visit New Delhi soon. India is firm on protecting sensitive sectors such as agriculture and dairy, which remain major sticking points in talks.
FII flows continue to remain sharply negative amid this uncertainty. Domestic institutional investors are likely to play a key role in offsetting foreign outflows, but the overall market performance will hinge on the evolving trade situation with the U.S. and any further geopolitical developments.
Market sentiment will largely depend on progress in resolving these issues, with potential for relief if a constructive deal is finalized.
Next week, important events to watch include the Reserve Bank of India’s monetary policy decision, auto sales data, and major earnings releases.
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Source: HDFC Securities Prime Research
