India Keeps Rates Steady: What It Means for Markets

• RBI holds key rate at 5.25%, signaling a pause in the rate-cutting cycle and confidence in the economy, with liquidity measures being more important than rate cuts.
• The US-India trade deal and potential EU FTA are seen as confidence boosters, potentially easing currency pressures and supporting exports, especially for smaller manufacturing sectors.
• India's equity market is now 'relatively fairly valued' with 12-13% EPS growth expected, but faces competition for global fund flows from North Asia's tech/memory cycle.
• The IT sector faces a 'very real threat' from AI, with uncertain long-term impacts on job creation and economic activity, making it difficult to advocate for IT companies at present.
• Financials and urban discretionary consumption are highlighted as interesting sectors due to supportive regulation and improved disposable income, though competitive intensity remains a challenge for consumer companies.

The Reserve Bank of India's decision to hold rates at 5.25% signals confidence in India's economic outlook, supported by recent trade deals with the US and potential EU FTA. While India offers respectable growth and improved valuations, it faces competition for foreign capital from other exciting global markets, particularly in North Asia's tech sector.