RBI MPC Meeting December 5, 2025: How Repo Rate Decision, Trump Tariffs and a 90-Rupee Dollar Could Move Sensex, Nifty and Your EMIs

A high‑stakes policy day for markets and the economy

India heads into the final Reserve Bank of India (RBI) Monetary Policy Committee (MPC) meeting of 2025 with an unusual mix of tailwinds and red flags:

Retail inflation has collapsed to a record low 0.25% in October, well below the RBI’s 2–6% target band. ^[1]
Real GDP growth has surprised on the upside at 8.2% in Q2 FY26, the fastest in six quarters. ^[2]
The rupee has slipped past ₹89 and breached ₹90 to the dollar, hovering near an all‑time low amid a wide trade gap and persistent foreign outflows. ^[3]
The US has doubled tariffs on many Indian exports to 50%, triggering a 28.5% slide in shipments to America over just five months and battering labour‑intensive sectors. ^[4]

Against this backdrop, RBI Governor Sanjay Malhotra will announce the MPC’s December decision at 10 am IST on Friday, December 5. At the time of writing, the outcome has not yet been announced, but expectations are sharply divided between another 25 bps repo rate cut and a status‑quo pause. ^[5]

For equity markets, the rupee, bonds and your EMIs, what the RBI does — and how it explains that decision — could set the tone well into 2026.

Where Sensex and Nifty stand before RBI policy

Thursday’s rebound masks fragile sentiment

On Thursday, December 4, Indian benchmarks finally broke a four‑day losing streak:

Sensex closed at 85,265.32, up 158 points (0.19%).
Nifty 50 ended at 26,033.75, up 48 points (0.18%). ^[6]

Gains were driven largely by IT stocks, which benefited from:

Expectations of a US Federal Reserve rate cut next week, and
A weaker rupee that improves dollar‑denominated revenues for software exporters. ^[7]

However, the broader market picture was not as cheerful:

Market breadth was bearish — over 2,300 stocks declined vs ~1,800 advancing on the BSE.
Small‑caps fell and mid‑caps were flat, signalling ongoing risk‑off behaviour beyond frontline IT and a few heavyweights. ^[8]

Foreign institutional investors (FIIs) have been net sellers in recent sessions, locking in profits after indices hit 14‑month record highs and turning cautious ahead of the policy decision and US tariffs‑related uncertainty. ^[9]

Technical setup: Nifty boxed in by RBI risk

Short‑term charts suggest the Nifty is delicately poised:

Resistance zone: 26,100–26,150
Support zone: 25,900–25,950
A decisive drop below 26,000 could trigger a quick slide back toward 25,900. ^[10]

Analysts expect a choppy, range‑bound market before the policy, followed by a burst of volatility once the decision and guidance hit the tape.

RBI’s 2025 journey: From aggressive cuts to a cautious pause

To understand why today’s meeting is so contested, it helps to rewind through 2025:

February 7, 2025 – First cut in nearly five years
- Repo rate cut 25 bps to 6.25%.
- RBI cited global uncertainty but comfortable inflation projections (around 4.8%) and FY26 GDP growth seen at 6.7%. ^[11]
April 9, 2025 – Cut plus accommodative stance
- Another 25 bps cut to 6.0%.
- Policy stance shifted from neutral to accommodative.
- Growth forecast trimmed to 6.5% as Trump‑era tariffs and global slowdown concerns began to bite. ^[12]
June 6, 2025 – Front‑loaded easing
- A sharper 50 bps cut to 5.5%, bringing the total reduction this year to 100 bps.
- Stance moved back to neutral, signalling less room for further cuts.
- FY26 CPI inflation projected at 3.7%, reinforcing a benign price outlook. ^[13]
October 1, 2025 – Dovish pause
- Repo rate left unchanged at 5.5%, stance neutral.
- FY26 GDP growth forecast raised to 6.8% from 6.5%.
- FY26 CPI inflation forecast slashed to 2.6%, with some quarterly projections dipping well below 2%. ^[14]

By the October meeting, the MPC had already delivered a full one‑percentage‑point rate cut and was leaning on regulatory reforms and credit‑flow measures rather than fresh easing.

Today’s December review is therefore happening after significant front‑loading of cuts, at a time when inflation has collapsed even further and growth has outperformed.

December 5 policy expectations: Cut or pause?

What the polls say

Different surveys and liveblogs paint a genuinely split picture:

A Reuters poll of economists expects the RBI to cut the repo rate by 25 bps to 5.25%, and then hold it there through 2026. ^[15]
A Business Standard poll of 12 economists finds 7 expecting no change today, arguing that strong GDP growth justifies caution after earlier cuts. ^[16]
Market commentary tracked by Indian Express, Moneycontrol and ETNow shows many analysts calling it a “close call” between a final 25 bps cut now and a hold with hints of easing in early 2026. ^[17]

In short: there is no consensus, which is exactly why markets are so sensitive to the tone of Governor Malhotra’s statement.

The “cut now” camp: Inflation collapse and tariff shock

Those arguing for a 25 bps cut stress:

CPI inflation is just 0.25%, far below the RBI’s 4% target and even below the lower end of its 2–6% tolerance band. ^[18]
Real policy rates (repo minus inflation) are now extremely high in real terms, risking an unnecessary drag on demand.
US tariffs have slammed Indian exports: a Times of India analysis shows exports to the US fell 28.5% in just five months, with steep declines in labour‑intensive goods like textiles (‑31.9%), gems and jewellery (‑27.3%), solar panels (‑75.7%) and agri‑food products (‑45.4%). ^[19]
With tariff‑hit sectors already cutting jobs and facing cancelled orders, a small rate cut could support domestic demand and investment as a buffer.

Some economists also note that the RBI has previously signalled room for further easing, pointing to Governor Malhotra’s recent remarks and the October forecast path for very low inflation. ^[20]

The “hold for now” camp: Rupee stress and external vulnerability

Economists in the status‑quo camp focus on financial‑stability risks:

The rupee has slid to near record lows, closing around ₹89.46 per dollar on December 1 and later breaching ₹90, even as the RBI stepped up dollar‑selling interventions. ^[21]
A Reuters preview notes that foreign investors have pulled nearly $17 billion from Indian equities this year, partly due to prolonged uncertainty around a US‑India trade deal and 50% tariffs that remain in place. ^[22]
A sharper cut could widen interest‑rate differentials with the US at a delicate time, possibly increasing pressure on the rupee and sovereign borrowing costs.

Banks such as Bank of Baroda and several research houses now explicitly expect the RBI to keep the repo rate unchanged at 5.5% and retain the neutral stance, emphasising that growth momentum is solid enough to justify patience. ^[23]

Why the rupee and Trump’s tariffs loom over Mint Street

The December policy isn’t happening in isolation. Two external forces are shaping the RBI’s calculus:

1. A rupee under sustained pressure

The currency is trading around all‑time lows just under ₹90 per dollar, even after the RBI increased its short‑dollar positions in October by $4.2 billion to $63.6 billion to lean against the slide. ^[24]
Traders expect the 10‑year bond yield to stay in a 6.51–6.58% band until the policy outcome provides direction. ^[25]
Government officials have downplayed the risk of a currency crisis, but market commentary warns that further depreciation could import inflation once global commodity prices turn, and undermine foreign investor confidence. ^[26]

2. US tariffs and geopolitical tension

The US has imposed punitive tariffs of up to 50% on many Indian products, ostensibly in response to India’s continued purchases of discounted Russian oil. ^[27]

A detailed Times of India breakdown shows exports to the US down 28.5% between May and October, with job losses spreading across textile hubs like Tiruppur and Panipat, diamond centres in Gujarat, chemical clusters in Vapi and Dahej, and coastal seafood hubs from Nellore to Veraval. ^[28]
Russian President Vladimir Putin’s visit to India this week has highlighted how New Delhi is juggling its old partnership with Moscow and growing ties with Washington — a diplomatic balancing act that feeds directly into trade, capital flows and the rupee. ^[29]

The more entrenched these external headwinds become, the stronger the case, some argue, for domestically‑focused monetary support — but also the stronger the argument to avoid doing anything that rattles the currency further.

How markets could react under different RBI scenarios

Because expectations are so finely balanced, even a “small” move or subtle phrase in Governor Malhotra’s statement could trigger outsized reactions.

Scenario 1: 25 bps cut to 5.25% with dovish commentary

What it might look like

Repo rate cut 5.50% → 5.25%.
Stance remains neutral, but with guidance that future moves will depend on inflation rising back towards target.
Growth and inflation forecasts remain broadly similar to October, perhaps with a slight downgrade to external demand.

Likely market reaction (short term)

Sensex & Nifty 50:
- Relief rally in banks, NBFCs, autos, real estate and other rate‑sensitives.
- IT and export names could benefit further if the rupee softens again.
Rupee:
- Initial knee‑jerk weakness, especially if global dollar sentiment is firm.
- Pressure mitigated if the RBI couples the cut with strong FX‑intervention signals.
Bond yields:
- 10‑year yields could drift below the 6.5% area as traders price a slightly longer easing cycle. ^[30]

Scenario 2: Status quo at 5.5% but with an easing bias

What it might look like

Repo rate unchanged at 5.5%.
Stance stays neutral, but the statement emphasises:
- exceptionally low inflation,
- tariff‑led export risks, and
- readiness to act quickly if growth slows.

Likely reaction

Equities:
- Short‑term disappointment for high‑beta rate‑sensitives, but relief that rupee risk is being taken seriously.
- Markets may shift to pricing the first cut in early 2026, capping downside.
Rupee & bonds:
- Positive surprise; could stabilise the rupee and keep yields within the current range. ^[31]

This is increasingly seen as the base case among domestic economists. ^[32]

Scenario 3: Status quo and a clearly hawkish tone

What it might look like

No cut, plus language stressing financial‑stability risks, rupee protection and the need to “look through” temporarily low inflation.

Likely reaction

Sensex & Nifty 50:
- Sharp intraday volatility; banks, NBFCs and real estate could see profit‑taking.
Rupee:
- Could strengthen modestly if markets interpret it as a sign that RBI will defend the currency aggressively.
Debt:
- Short‑term yields rise on reduced easing expectations; long‑term yields may stay anchored if growth forecasts remain robust.

While not the central market expectation, this scenario cannot be fully ruled out, especially if the RBI is more concerned about external vulnerabilities than economists currently assume.

Stocks and sectors to watch on December 5

Rate‑sensitive pockets: Banks, autos, real estate, NBFCs

Business Standard and ETMarkets highlight that banks, financial services, autos and real‑estate stocks will be at the centre of today’s trade as they are directly exposed to lending‑rate moves. ^[33]

These include large private lenders, housing‑finance companies, and developers who have already benefited from earlier rate cuts and are sensitive to even small changes in borrowing costs.

IndiGo, ITC Hotels, Adani Enterprises and more

Beyond the macro, several company‑specific stories intersect with policy day: ^[34]

InterGlobe Aviation (IndiGo)
- Under pressure amid large‑scale flight cancellations after a government order on pilot rest.
- Civil Aviation officials held an urgent review meeting with the airline on Thursday, with cancellations expected to continue for 2–3 days as schedules stabilise.
- The stock has already been sliding; any further weakness could weigh on travel and aviation sentiment.
ITC Hotels
- British American Tobacco (BAT) plans to sell 7–15.3% of its stake, putting the spotlight on hospitality valuations and potential ownership changes.
Adani Enterprises
- LIC and GQG Partners may participate in the company’s ₹24,930‑crore rights issue, which could influence index weightings and liquidity.
Tata Power
- Work at the company’s Mundra units remains temporarily suspended, with resumption only expected closer to December 31, 2025. Power sector names may see stock‑specific moves regardless of policy.
IndusInd Bank, YES Bank and Samvardhana Motherson
- IndusInd has denied reports of bringing in a strategic partner.
- YES Bank announced a bancassurance tie‑up with LIC.
- Samvardhana Motherson approved the acquisition of the remaining 10% in a key South African subsidiary.

Infrastructure, chemicals and REIT plays such as RailTel, Deepak Nitrite, Diamond Power and Brookfield India REIT are also on broker watchlists thanks to fresh orders, new plants and fundraising plans. ^[35]

IT and export‑oriented themes

IT giants and mid‑tier software exporters have outperformed on hopes of Fed cuts and a weaker rupee boosting dollar earnings. ^[36]
Export‑linked sectors hit hardest by US tariffs — textiles, gems & jewellery, solar, chemicals and marine products — will be watched closely for any RBI commentary on external demand and trade shocks. ^[37]

What today’s decision means for your EMIs and savings

Home, car and personal‑loan EMIs

If the RBI cuts the repo rate by 25 bps, banks are likely to gradually trim lending rates on floating‑rate home, car and personal loans. The transmission from previous cuts has already started, but with a lag, and another move could shave a modest amount off monthly EMIs over the next few quarters. ^[38]
If the RBI holds at 5.5%, your existing EMIs are unlikely to change immediately — but markets will then look for an easing signal in early 2026 rather than in this policy.

Fixed deposits and debt investors

A further cut would increase the risk of lower deposit and small‑saving rates over time, particularly if inflation stays anchored below 3%.
For long‑term debt mutual funds and bond investors, low inflation with gradual, well‑signalled easing is generally supportive, but sudden policy surprises can spike volatility in yields. ^[39]

Key cues to track through the day

As the policy decision unfolds, traders and long‑term investors alike will be watching:

The headline repo rate – 5.5% vs a potential 5.25%.
Policy stance language – “neutral” vs any hint of a return to “accommodative”.
Updated GDP and CPI forecasts – particularly whether the RBI still sees FY26 GDP near 6.8% and inflation closer to 2–3% or nudges numbers higher due to rupee and tariff effects. ^[40]
Commentary on the rupee – any explicit mention of FX interventions, external balances or US tariffs. ^[41]
Sensex/Nifty reaction around 10–11 am – especially the behaviour of banks, NBFCs, autos, real estate and IT. ^[42]
Bond yields and G‑Sec auction signals – whether the 10‑year yield breaks out of its current 6.51–6.58% band. ^[43]