8.2% Q2 GDP growth: What can it do to the equity markets, RBI decision on interest rates?

Kolkata: Rarely has high GDP growth numbers been delivered at such a momentous occasion. While the equity markets are kissing all-time high levels, the Reserve Bank is also days away from its bimonthly meeting to decide on whether to exercise the scissors on the policy Repo Rate. The rate-setting Monetary Policy Committee of the RBI is supposed to meet on December 3-5 to decide on whether the policy rate, no at 5.5%, needs another trim.

While expert agencies such as SBI Research was pushing for a 25 basis point Repo Rate cut, it assumption was that the economy might have grown at 7.5% in Q2FY26 with drivers such as higher festive expenditure, GST cuts, rural recovery and robust investments work across key sectors. Poll of economists carried out by different organisations could not estimate the 8.2% growth rate that the economy delivered in the Q2FY26 (July-September) period. RBI's own projection was 7% for this quarter.

With the high growth rate beyond anyone's projection being posted, it becomes really challenging for the RBI to take a decisive look at whether to take out the scissors in just five days at all. While the multi-decade low retail inflation appears conducive to a rate cut, the high GDP growth makes such a decision vey tricky indeed, analysts are arguing. With growth rates being achieved, RBI could be prioritising to keep the inflation low.

Some analysts are quick to point out that the growth rate of 8.2% which have factored in high growth in manufacturing and services, have just partially captured the festive demand spurt since much of the expenditure took place in October, which remained outside the purview of the Q2FY26 data. The positive impact of the festive push and GDT rejig will be captured perhaps in a bigger measure in the Q3FY2 data.

But how can the equity market react to this piece of growth push information when trading begins on Monday? Both Sensex and Nifty kissed lifetime highs on Thursday, Nov 27 before coming down to slightly sober levels. Sensex was at 86055.86 and Nifty was at 26,295.55 at one point of time on Thursday in their exuberant best and most significantly on a day when the FIIs were net sellers. The two broad indices were at 85,706.67 and 26,202.95 at close on Friday, escaping the GDP data by a short window and analysts said it appeared that investors were trying to hold their horses.

Analysts indicated that the GDP numbers beyond everyone's expectations is likely to create a strong investment pull and Nifty 50 could sail past the key resistance level of 26,250 on Monday. Having crossed the 86,000 mark on Thursday, it remains to be seen how much Sensex rises above that mark on Monday. Whatever the level, new peaks of both indices seem to be quite certain on December 1 as bullish investors could be looseing their purse strings.