Edit this postThe Reserve Bank of India (RBI has reduced its key lending rate, the repo rate, by 25 basis points to 6.25%, marking the first rate cut since May 2020.
Reason for Rate Cut: The main reason
for the rate cut is the expectation of an
easing of Consumer Price Index (CPI
inflation to 4.5% - 4.7% in January 2025
from 5.2% in December 2024, and the
need to boost economic growth which is
estimated at 6.4% for FY25, the lowest in
four years.
Impact on Debt Funds: A reduction in
interest rates typically increases the value of bonds held by debt funds, especially those with higher coupon rates, leading to a rise in the Net Asset Value (NAV of these funds.
