Bond markets get a boost because RBI rates and hints owns at Future Easing

The Monetary Policy Committee (MPC) of the Reserve Bank of India held the policy rates unchanged in its assessment of October 2025, as generally expected, and retained its neutral attitude.

The communication of the central bank, however, meant an important shift, which restored market confidence after months of uncertainty.

According to Suyash Choudhay, head – fixed income at Bandhan AMC, the RBI acknowledged that inflation is the projections under the underlying GST after the GST reduction and is expected to stay close to the goal in the coming year.

At the same time, the estimates of growth were revised higher, which reflects the strong GDP performance of India, although the central bank marked risks from worldwide uncertainties.

“The most important thing is that the space for further relaxation is explicitly recognized, even if the MPC has chosen to wait now for the monetary and fiscal relaxation to play so far,” Choudhary noted. He added that two external members of the MPC had even suggested moving the attitude from neutral to accommodation.

Bond market lighting

Markets had been rattled since the abrupt posture change in June, which, in combination with a heavy state development loan (SDL) offer, caused persistent pressure on bond returns.

“What started as a problem of long -term delivery has changed into a much broader issue of generalized apathy to buy bonds,” said Choudhary.
Despite falling inflation, low financing rates and the delay of credit growth, the sentiment had remained moderately in fixed -income income. This even influenced the 5-year segment, traditionally a favorite trade in a relaxation cycle. Against this background, Bandhan AMC is overweight on the 6-9-year-old segment of government effects in its active duration and gilded funds.

Expectations of a rate reduction

With the policy of October, the market expectations for the next rate reduction, probably in December, have been revived.

“This should reduce the interest in the bond market, especially at the maturities of 5-9 years, which are well maintained from a valuation position,” Choudary explained.

He expects the yield curve to steep, because the long bond returns will be limited but floors have gone higher due to persistent delivery pressure. Large SDL issues continue to offer attractive alternatives to long-term investors, which increases corporate bonds in the short term.

Macro stability and policy coordination

Choudhay emphasized that if external growth is headwind intensive, both monetary and fiscal policy will probably respond in a calibrated way, so that macro -economic stability retains.

It is important that the tax framework will shift from next year to the aiming of debt-to-BDP ratios in the medium term instead of annual tax deficits, which offers more flexibility while maintaining credibility.

An important collection meal of the Governor’s statement, Choudhary said, was the emphasis on coordinated policy action:

“While India strives to achieve Viksit Bharat through the centenary year of his independence, it would need the coordinated support of fiscal, monetary, regulatory and other public policy to achieve its goal.”

Investment prospects

From an investment perspective, Choudhary believes that the time for “blunt” endurance trade is over. Instead, optimizing the duration can offer the best participation in the next phase of the Bond Market Rally in the 6-12-year-old maturity bucket-can.

“Investors have largely been on the sidelines in recent months, but because today’s policy applies the proverbial calming balm and valuations that have been considerably approved, the correct strategy selection based on investment horizon and risk eetlust can now be considered again,” he concluded.

((Indemnification: Recommendations, suggestions, views and opinions of experts are their own. These do not represent the views of economic times)