The Reserve Bank of India Monetary Policy Committee held the benchmark policy repo rate steady at 6.50% while maintaining its stance of withdrawal of accommodation. For equity analysts and corporate finance practitioners, central bank policy is the foundation upon which the risk-free rate is constructed.
In our valuation models across Indian equities, we anchor our risk-free rate to the 10-year Indian Government Bond yield at 6.95%. Sustained economic momentum and controlled retail inflation within the 4.0% target band provide stability to corporate borrowing costs.
System liquidity has transitioned toward neutral territory as foreign portfolio investment inflows offset seasonal tax outflows. For banking institutions, this liquidity environment supports gradual credit-to-deposit ratio normalization.