Policy Action
The Monetary Policy Committee (MPC) unanimously voted to raise the policy repo rate by 25 bps to 5.50% from 5.25%.
Monetary tightening is often described rather simply: the central bank raises interest rates, borrowing becomes more expensive, demand slows and inflation eventually moderates. But from an investor’s perspective, a more interesting question arises: who actually absorbs the interest-rate hikes?
Bollywood aficionados may remember Deewaar (the 1970’s blockbuster) as the story of two brothers who take very different paths: one choosing the more disciplined road, the other accumulating enormous wealth but making choices whose consequences eventually begin to show. The evolution of India and the US over the past decade offers an interesting parallel.
For years, Indian car buyers have prioritised mileage, with hatchbacks and sedans symbolising urban aspirations. Yet, even then, Multi-Purpose Vehicles (MPVs) held their ground – valued for their space, power and durability.
The Indian Rupee (INR) has been on a weaker trajectory in 2025, depreciating by 3.7% against the US Dollar as of September 30, 2025. This comes even as the US Dollar Index has declined by around 10% against other major currencies. Consequently, the INR’s fall against key global currencies has been even more pronounced.
