RBI Likely To Hold Rates As Crude Prices Stay High; Metal And Mining Stocks Seen As Key Beneficiaries

New Delhi, April 7: The Reserve Bank of India (RBI) is likely to keep policy rates on pause as liquidity tools will take centre-stage in 2026, even as crude prices sit about 50 per cent above the central bank’s $70 per barrel assumption, a report said on Tuesday.

"Current oil prices are 50 per cent above RBI’s assumption of $70/bbl. Despite this, we continue to see a high bar for monetary tightening," the report from SBI Mutual Funds said.

Sectoral impact of elevated energy prices

The AMC firm noted metals and mining as sectoral winners from higher energy prices and flagged negative impacts for airlines, tourism, chemicals, fertilisers and textiles. IT, telecom, pharma and power are relatively safe bets, it added.

With large-cap valuations now inexpensive, any moderation in energy prices could cause a swift market recovery and support early-teen returns for Indian large-cap indices, the report said.

"We believe that if the energy shock were to recede soon, on a potential agreement between US and Iran, earnings and macro impact could be transient and potentially already factored into equity prices with the recent market correction," it said.

Liquidity outlook and OMO requirements

An elevated balance of payments deficit in FY27 could strengthen the case for RBI conducting OMO purchases to keep liquidity at current surplus levels.

Assuming a Rs 3.5 trillion deficit, the firm estimated a potential requirement for Rs 4.5–Rs 5 trillion of additional OMO purchases to keep liquidity near current levels.

Growth and inflation projections

The firm forecasts real GDP growth to moderate from an estimated 7.8 per cent year-on-year in FY26 to about 6.5 per cent in FY27, while nominal GDP is likely to rise from 9 per cent to roughly 12–13 per cent.

Food inflation poses a larger risk due to an unfavourable base and potential weather disruptions during the Kharif season.

“We expect CPI inflation to average around 5 per cent in FY27, with certain months potentially registering readings closer to 6 per cent,” the report said.

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Geopolitical risks may keep crude elevated

The report also warned that the rising likelihood of more frequent geopolitical disruptions will lead to precautionary inventory builds and strategic reserve expansions, keeping crude prices elevated for an extended period.

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