RBI Policy Preview: The “Rupee vs. Growth” Dilemma – Will They Cut Rates?

RBI MPC Meeting Dec 2025| Repo Rate Cut Prediction| Stocks to Watch RBI Policy

Event: RBI Monetary Policy Committee (MPC) Meeting Dates: December 3 – 5, 2025 Announcement: Friday, December 5, 2025 (10:00 AM IST)

All eyes are on Mumbai as the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) kicks off its critical three-day meeting tomorrow, Wednesday, December 3, 2025.

The backdrop is intense: The Nifty 50 is battling to hold 26,000, and the Indian Rupee (INR) has just hit a historic low of 90.02 against the dollar. This creates a massive dilemma for the Governor: Cut rates to boost growth or Hold rates to defend the falling Rupee?

In this detailed preview, we break down what the market expects, which sectors will be impacted, and the specific stocks you should have on your radar.

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1. The Core Dilemma: What Will the RBI Do?

The market consensus is currently split, making this one of the most unpredictable policies of 2025.

Scenario A: The “Growth Booster” (25 bps Rate Cut)

• Probability: 40%
• Rationale: Inflation has moderated in recent months, and the US Federal Reserve has signaled dovishness. A rate cut would fuel the ongoing festive demand in Auto and Real Estate.
• Market Reaction: Instant rally. Nifty could reclaim 26,500; Bank Nifty could blast past 60,500.

Scenario B: The “Currency Defender” (Status Quo / Pause)

• Probability: 60% (Most Likely)
• Rationale: With the Rupee at 90, a rate cut would narrow the interest rate differential with the US, potentially weakening the currency further. The RBI might choose to keep rates unchanged at 6.50% but shift its stance to “Neutral,” signaling a cut in February.
• Market Reaction: Muted to slightly negative initially, but if the commentary is dovish, the market will recover.

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2. Sectors & Stocks to Watch

Volatility will be highest in Rate-Sensitive Sectors. Here is your watchlist:

A. Banking & Finance (Bank Nifty)

• Impact: High. Banks have been under pressure due to tight liquidity. A rate cut would reduce their cost of funds but might compress margins initially.
• Stocks to Watch:
  • HDFC Bank & SBI: The heavyweights will dictate the trend. Watch for comments on “Credit Growth” vs “Deposit Growth.”
  • Bajaj Finance: NBFCs benefit most from a rate cut as their borrowing costs drop immediately.

B. Real Estate (Nifty Realty)

• Impact: Very High. High interest rates have slightly dampened affordable housing demand. A pause or cut is crucial to keep the EMI burden manageable for homebuyers.
• Stocks to Watch:
  • DLF: Leading the luxury segment; highly sensitive to sentiment.
  • Godrej Properties: Strong launch pipeline; reacts sharply to policy cues.

C. Auto Sector (Nifty Auto)

• Impact: Moderate to High. With November sales already strong, a dovish policy would be the cherry on top for vehicle loans.
• Stocks to Watch:
  • Tata Motors & M&M: Already rallying on sales data; a rate pause supports the momentum.
  • Maruti Suzuki: Highly sensitive to entry-level car demand, which depends on loan rates.

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3. The “Rupee Factor” (USD/INR)

This is the elephant in the room. The RBI Governor’s commentary on the Rupee will be scrutinized.

• If the RBI sounds hawkish (strict) about defending the currency, IT Stocks (TCS, Infosys) might see profit-booking as the Rupee could strengthen slightly from 90.
• If the RBI prioritizes growth and lets the Rupee slide, IT & Pharma (Exporters) will benefit.

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4. Trader’s Playbook: How to Trade the Event?

The policy announcement is on Friday at 10:00 AM. Here is a setup for the days leading up to it.

Strategy	Logic	Instrument
Long Straddle (Dec 5 Expiry)	Expecting a violent move (either way) after the speech.	Buy ATM Call & Put on Bank Nifty (Thursday closing).
Iron Condor (Safe Play)	If you expect a “Pause” and market consolidation.	Sell OTM Call & Put, Buy further OTM wings for protection.
Sector Rotation	Betting on a “Pause”.	Shift money from Banks to FMCG/Pharma (Defensives).

Analyst View: “The market has already priced in a ‘Pause’. The surprise element will be the Guidance. If the Governor says ‘Rate cuts are coming soon,’ the market will fly even if rates aren’t cut this time.”

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5. Conclusion

While the Rupee at 90 is a concern, the underlying economic growth remains robust. The RBI is walking a tightrope. For investors, this dip toward 26,000 offers a great accumulation zone in high-quality banking and auto stocks ahead of the verdict.

Key Level to Watch: Bank Nifty 59,000. If this holds until Friday, the post-policy rally could be fierce.

RBI MPC Meeting Dec 2025| Repo Rate Cut Prediction| Stocks to Watch RBI Policy

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by Mirae Asset (m,Stock)