RBI MPC Outcome: PSU bank stocks slide up to 1.5% after RBI holds rates steady at 5.5%

Core Viewpoint - The Reserve Bank of India's decision to maintain the repo rate at 5.5% has led to a decline in public sector bank stocks, despite an upward revision of GDP growth forecast for FY26 to 6.8% from 6.5% [6]. Group 1: Market Reaction - Public sector bank stocks fell as much as 1.4% intraday, with the Nifty PSU Bank index slipping 0.78% to 7,468.10, as all constituents traded in the red [6]. - Indian Bank was the top loser, down 1.43%, followed by Canara Bank, also down 1.43%, and Punjab National Bank (PNB), which shed 0.73% [6]. - Heavyweights like State Bank of India (SBI) and Bank of Baroda dipped over 0.5%-0.7%, while most other PSU lenders saw mild declines or flat moves [6]. Group 2: Economic Outlook - Market experts suggest that the RBI's decision to hold rates was expected, but it may have disappointed those looking for signals on easing liquidity conditions or rate cuts [3][4]. - The macro environment remains broadly supportive for markets, with improved activity indicators, GST-led formalization, and falling inflation [4]. - Remittance-led flows and a narrowing current account deficit are seen as potential tailwinds for the economy [4]. Group 3: Expert Opinions - Divam Sharma from Green Portfolio PMS noted that the RBI is rightly choosing to retain policy flexibility amid evolving geopolitical risks [3][4]. - Jyoti Prakash from AlphaaMoney expressed concerns about uncertainties surrounding U.S. tariffs on India, suggesting that rate cuts may only come after a trade agreement with the U.S. is established [5]. - Sharma also indicated that the RBI's cautious tone could lead to near-term volatility in the market [4].