Q2 GDP Surprise Boosts Sentiment Even as December Rate Cut Bets Cool

India’s latest Q2 GDP data did more than surprise the market — it reshaped the conversation around growth and policy.

The number came in far stronger than anyone expected, pushing optimism higher but also pausing the excitement around a possible December rate cut.

Market Performance: A Sentiment Shift on the Street

By the time the GDP headline hit, the broader market sensed the tone change.

Stronger growth lifted confidence around India’s economic resilience.

But the same strength slowed down expectations of an immediate policy turn.

Investors stepped into the day balancing two narratives:

• Solid real activity supporting near-term economic momentum
• Reduced probability of a December rate cut, now seen closer to 60% instead of the earlier 70–80%

This combination created a steady but watchful mood across sectors.

Main News: Q2 GDP Delivers a Big Surprise

The latest Q2 GDP print landed well above market expectations.

The strong reading has nudged full-year FY26 growth projections higher, with consensus moving toward the 7–7.5% zone.

The headline number didn’t just beat forecasts — it forced a relook at how quickly the economy is expanding.

Several key themes stood out:

• Real activity remained robust.
• Consumption came in stronger, supported by previous tax adjustments.
• Net exports stayed weak, slowing down the overall balance.
• Nominal GDP grew only 8.7%, reflecting a soft deflator and a narrowing gap between real and nominal growth.

The interesting twist?

While the GDP number energises growth sentiment, it also complicates the near-term policy outlook.

Company Details?

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Since the current topic is Q2 GDP, the focus remains purely macro.

Policy Angle: December Rate Cut Bets Lose Momentum

Before the data, the market was leaning toward a December reduction in policy rates.

But the stronger Q2 GDP print changed the tone.

The probability of a cut, once sitting around 70–80%, is now closer to 60%.

The logic is simple:

• Strong growth removes urgency.
• Softer inflation helps real GDP
• But a firm print reduces the immediate need for policy easing.

The debate has now shifted from “when the cut happens” to “whether the cut may be pushed forward.”

Some continue to see room for easing due to slowing global demand and soft exports, but the conviction is clearly weaker than before.

Summary: A Strong GDP, A Softer Rate-Cut View

India’s Q2 GDP created a clear two-sided story for the market.

• Growth Outlook: Improved, with FY26 estimates drifting toward 7–7.5%
• Market Mood: Positive but cautious
• Rate Cut Probability: Down to ~60% from 70–80%
• Key Drivers: Strong consumption, low deflator, soft nominal GDP, weak exports

The number lifted confidence in India’s growth cycle but also made the December policy call more complicated.