No more RBI rate cuts? Ankush Jain says oil and weak rupee may force a longer pause
Date: June 4, 2026
Based on the revised inflation outlook, no further cuts in interest rates are expected from the RBI in the coming months, Ankush Jain
Ankush Jain, the Director and Fund Manager at Steptrade Capital expects the RBI to revise the inflation projections higher to about 5 percent, with an expected GDP growth outlook of 6.6 percent for FY27, in June policy meeting.
Based on the revised inflation outlook, no further cuts in interest rates are expected from the RBI in the coming months, said Jain in an interview to Moneycontrol.
According to him, Q1FY27 earnings will remain moderate due to imported inflation, currency depreciation, higher shipping and logistic cost, margin pressure and elevated operating expenses.
As a result, profitability will remain under pressure despite healthy revenue growth, he said.
Do you think the government should introduce favourable energy policies to help boost India’s economy?
Yes, energy imports represent one of the largest structural burdens on Indian economy. India imports about 85 percent of its crude oil and around 50 percent of natural gas; hence any rise in their price impacts all sectors of Indian economy instantly. Where energy prices are uncertain, capex cycles become delayed.
In this respect, from both economic and policy standpoints, proper energy policies must be made in order to propel the economy of India forward particularly in light of India’s growth trend and energy needs. Capex cycles for solar, green hydrogen, storage are happening in reality right now in many companies.
What are your expectations from the RBI policy this week? Do you still see the possibility of another rate cut this year?
Monetary Policy Committee (MPC) of the Reserve Bank of India will probably maintain interest rates in the upcoming review meeting. We expect the RBI to revise the inflation projections higher to about 5 percent, with an expected GDP growth outlook of 6.6 percent.
Furthermore, the inflation projections for FY27 could increase to 5-5.1 percent on account of imported inflation driven by rising oil prices, higher transport cost and a weakening rupee that has little scope of appreciation against a backdrop of external uncertainties.
Based on the revised inflation outlook, no further cuts in interest rates are expected from the RBI in the coming months.
Do you think the government should introduce favourable energy policies to help boost India's economy?
Yes, energy imports represent one of the largest structural burdens on Indian economy. India imports about 85 percent of its crude oil and around 50 percent of natural gas; hence any rise in their price impacts all sectors of Indian economy instantly. Where energy prices are uncertain, capex cycles become delayed.
In this respect, from both economic and policy standpoints, proper energy policies must be made in order to propel the economy of India forward particularly in light of India's growth trend and energy needs. Capex cycles for solar, green hydrogen, storage are happening in reality right now in many companies.
Do you think India's relative risk-reward profile may remain weak for FIIs unless the AI-led earnings equation changes?
The risk-return equation for FIIs in India may still be relatively unappealing in the immediate future because of high valuations and uncertainties around the globe. FIIs continue to cycle based on their valuations from country to country. However, the healthy demand in India, along with its investment cycle in infrastructure and its growth factors, will continue to propel its earnings going forward.
Although artificial intelligence might boost profits, India's investment opportunity does not hinge entirely on artificial intelligence-driven earnings.
Have countries like China, Korea, and Taiwan created a stronger risk-reward opportunity for foreign investors compared to India?
China has attracted investor interest due to its relatively lower market valuations, policy measures to support economic growth, and its well-established manufacturing ecosystem. The country benefits from a highly integrated supply chain, lower dependence on external sources for critical raw materials, and a dominant position in the production and processing of several strategic minerals. These factors provide China with a competitive advantage in key industries such as manufacturing, electric vehicles, batteries, and renewable energy. But China is a trade and not a structural allocation due to regulatory unpredictability.
Likewise, high valuation in South Korea and Taiwan is justified by their robust exposure to the technology and semiconductor markets, which will reap the gains from the current wave of digitization and AI.
On the other hand, despite the superior long-term potential for growth in India, backed by domestic demand and positive demographics, the country still relies on imports for some of its energy needs and critical minerals, and it is still developing its industrial and supply chain capabilities. As an investor in small and micro-cap India, I am witness to the evidence on the ground through orders being booked, capacities being built up, and the demand for credit coming from actual companies. These are the economic truths that will ultimately come true in terms of profits and valuation.
Is the hard-assets investment theme — such as ports and power — gaining traction in India?
Yes, and this is one of the best sectors that has attracted many small-cap investors.
Since the year 2014, the NDA government has focused strongly on infrastructure growth. As a result, the power, port, and other sectors are growing strongly due to strong government spending in capital expenditure, active participation from the private sector, rapid urbanization, and economic growth of India into a developed country.
And a majority of them, who are contributing in their way, are still small companies that are not going to be small for much longer.
The power sector has seen good growth in recent years due to rising demand, rapid adoption of renewables, power grid modernisation, and heavy investments in the TCD network. This trend is likely to continue and will lead to strong growth over the next several decades.
Indian ports have witnessed tremendous change over the last 10 years. The cargo handling capacity at Indian ports has almost doubled in the same period to reach 2,762 MMTPA in 2024-25 from just 1,400 MMTPA, in 2013-14—an increase of 92 percent in major ports and 80 percent in non-major ports.
Do you believe Q4 earnings growth has been strong?
During the fourth quarter of fiscal year 2026, companies in India experienced their best quarterly revenue growth over the past 12 quarters, indicating positive business performance in various sectors that indicated the true performance of the economy. The quarter saw significant earnings growth owing to margin growth in various industries, including BFSI, metals & mining, pharma, defense, and IT. Truly, this was an important period for the long-term compounded value creation.
However, margins were squeezed for several sectors, including fertilizers, capital goods & electrical equipment, airlines, and logistics due to higher cost pressures, pricing challenges, and higher operating expenses. Despite revenue growth, profitability remained under pressure for these sectors.
What are your expectations for Q1FY27 earnings? Have you revised your FY27 earnings estimates, or do you still expect FY27 to remain a strong year for earnings?
Q1FY27 earnings will remain moderate due to imported inflation, currency depreciation, higher shipping and logistic cost, margin pressure and elevated operating expenses. As a result, profitability will remain under pressure despite healthy revenue growth.
Moreover, with such high macro uncertainty, geopolitical tensions, volatile crude, currency fluctuations, promoters and management are not ready to take expansion decisions. This delay in decision-making won't show up immediately in earnings but will definitely affect the YoY growth of companies. Especially for small and microcap companies, these aren't hedgeable risks. Every rupee of currency depreciation and every dollar move in crude hits them directly on the bottom line.
source : www.moneycontrol.com