RBI held at 5.25% on April 8, unanimous, neutral stance. GDP revised down to 6.9% from 7.6% for FY27. CPI forecast at 4.6%. that is the headline. the more interesting question is what comes next. the 125bps easing cycle happened in roughly 10 months from Feb 2025 to Dec 2025. since then the RBI has held twice. markets were pricing further cuts going into 2026 but the oil shock and rupee pressure have changed that sharply. Edelweiss now says markets are pricing up to 50bps of hike risk in FY27. Bank of Baroda said if CPI breaches 6% a hike towards end of FY27 is possible. that is a complete reversal from where expectations were in January. next MPC is June 3 to 5. what is everyone tracking before that?
The cycle summary is worth being precise about. RBI cut 25bps each in February, April, June, October, and December 2025 — 125bps total. The February 2026 meeting was a hold with a cautiously optimistic tone. April 2026 is also a hold but in a materially different context: crude above $100, rupee near record lows, inflation risks tilted upward. That said, calling this a hike cycle would be premature. The RBI explicitly said it is in wait-and-watch mode. A hike requires CPI to actually break above 6% for sustained periods, which the base case does not show. The base case is an extended pause, not a pivot to tightening.
okay so the question is not cut or hold anymore, it’s hold or hike?? that’s a pretty big shift from what everyone was saying in january
This is not the first time the cycle has reversed expectations quickly. I remember 2022 when the RBI went from accommodation to 250bps of hikes in less than 14 months because of the Ukraine oil shock. The pattern is similar here. External inflation shocks force the hand regardless of domestic comfort. The difference this time is that India’s fiscal position and growth fundamentals are stronger. That gives the RBI more room to hold without hiking unless the inflation data forces otherwise. I am not in the hike camp yet but I am not adding long duration bonds right now either.
so basically June MPC is binary depending on monsoon forecast and oil prices? and until then bond markets stay uncertain?
roughly yes. june meeting is the next real catalyst either way. my current read: hold extends through FY27 unless CPI breaks 5.5%+. hike only if sustained breach of 6%. in that base case current 2 to 4 year bond yields are attractive and worth locking in. long duration is where the risk is concentrated right now, not short duration. the 125bps cut cycle gave long duration a great run. that run is done for now. the next opportunity in bonds is in the carry, not the price appreciation.
tldr: easing cycle: 125bps done, over for now current stance: hold, neutral next risk: hike if CPI > 6% or monsoon fails best bonds to buy now: 2 to 4 year, AA and above, yields around 7.5% avoid: long duration, don’t chase price appreciation that already happened watch june mpc. monsoon forecast and may CPI are the two triggers.