# The Big Question: Why Indian stocks, bonds, and the INR aren’t faring well after the RBI’s 25 bps rate cut?

A rate cut normally cheers markets — but this time the reaction has turned negative because the macro backdrop is working against it. The RBI delivered a dovish message, but the street is reading it differently.

1) Rupee Panic: INR near 90.25/USD

A rate cut widens the interest-rate differential with the US just when the rupee is already under pressure. This sparks fears of more outflows = weaker INR = imported inflation risks.

Outcome:

a) INR slides
b) FII sentiment worsens
c) Bonds and equities feel the heat

2) Relentless FII Selling

FIIs have already pulled out ₹1.43 lakh crore YTD, and with the rupee weakening + lower carry advantage after the rate cut, outflows may accelerate.

Outcome:

a) Equities decline
b) INR weakens further
c) Bond demand falls

3) US–India Trade Deal Still Stuck

Markets were hoping the trade deal would counterbalance global uncertainty. Its delay adds to the risk-off mood and keeps pressure across asset classes.

4) Profit Booking After the Recent Rally

The RBI cut was fully priced in. When expectations are high, reality disappoints — triggering broad profit-taking.

5) Global Uncertainty Ahead of the US Fed Meeting

With the Fed set to decide on rates on Dec 10, traders are de-risking. Any hawkish tone could worsen outflows, so markets prefer to stay defensive.

Bottom-line

The 25 bps rate cut was meant to be a Christmas gift — but the combination of weak rupee, huge FII outflows, global uncertainty, and lack of new positive triggers has turned it into a sentiment dampener, dragging:

✔ Stocks
✔ Bonds
✔ INR

all lower simultaneously.

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