RBI Expected to Hold Interest Rate Steady in April Amid Strong Domestic Macroeconomic Indicators

RBI to Maintain Status Quo in April Policy Meeting, Says Rajesh Kothari

ALF Accurate Advisors Founder and Managing Director, Rajesh Kothari, expects the Reserve Bank of India (RBI) to keep interest rates unchanged in the upcoming April policy meeting. This decision is driven by the RBI's cautious stance on global uncertainties, particularly around crude oil prices and geopolitics.

Domestic macros remain relatively strong, with stable inflation and steady growth. However, the RBI is likely to prioritize financial stability and inflation vigilance, especially given external risks. If high crude prices persist, it could lead to higher subsidy burden, particularly for LPG and kerosene, lower excise flexibility, and potential pressure on the current account, which indirectly affects fiscal math.

Market Valuations

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The Nifty is currently trading around 18.5x FY27 earnings, which is below 10-year averages. While market valuations are not outright cheap, the risk-reward has improved meaningfully, particularly for long-term investors. This suggests that the downside is limited.

Impact of Crude Oil Prices

Oil prices sustaining above $100 per barrel can have an impact on the fiscal deficit. However, the extent of the impact will depend on how long prices remain elevated and the policy response of the government. India is far better placed than in earlier cycles, with stronger tax buoyancy, controlled subsidy frameworks, and improved fiscal discipline.

FY27 Earnings Expectations

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We are not overly concerned about FY27 earnings expectations at this stage. The Street is building in ~15% earnings growth, which comes on the back of a relatively low base of ~9% growth in FY26. However, the key monitorable remains crude oil prices, which can exert downward pressure on margins, particularly for consumption-oriented sectors.

Banking and Financial Stocks

We are selective in our approach towards banking and financial stocks amid the recent market decline. While the sector remains structurally strong, not all pockets offer equal opportunity. We prefer institutions with strong liability franchises, consistent asset quality, and better growth visibility.

Attractive Investment Themes

We continue to see digital platforms, defence, and pharma as structurally attractive themes. However, we are adopting a highly selective approach, focusing on business models with clear profitability visibility, not just growth narratives.