What the RBI Pause Means – Expert View by Anil Rego, Founder & Fund Manager of Right Horizons PMS

Anil Rego, Founder & Fund Manager of Right Horizons PMS, shares expert insights on RBI policy, small‑cap opportunities & growth themes in India.

Ever wondered what a seasoned expert makes of the RBI holding repo rate at 5.5%? Anil Rego, Founder & Fund Manager of Right Horizons PMS, offers clarity in a market full of guesswork. As someone who started Right Horizons in 2003 and pioneered contrarian investing with decades of insight, Rego unpacks how inflation dips, global risks, and India’s industrial momentum shape portfolios today. Let’s walk through his perspective on the RBI decision, small‑cap opportunities, and how you can think strategically.

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Why RBI Holding Rates Matters for Investors

India’s central bank on June 6, 2025, cut rates by 50 bps to 5.5% and slashed CRR by 100 bps, shifting stance from “accommodative” to “neutral” AIF & PMS Experts+9Reuters+9mint+9The Economic Times+4Business Today+4The Economic Times+4The Economic Times. Inflation was comfortably low—June CPI at ~2.1% with stable core numbers—creating room for such moves and justifying the RBI’s deliberate pause after frontloading 100 bps earlier in the year.

Growth vs. Inflation — RBI’s Tightrope

• Headline inflation remains under control, allowing surplus policy room.
  
• Core inflation anchored yet global uncertainties linger—tariffs, volatile capital flows.
  
• RBI’s neutral stance signals future decisions will be data dependent, not pre‑emptive.
  

Key takeaway: A stable rate at 5.5% reflects RBI’s comfort zone—growth boost without inflation risk.

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How Anil Rego Sees the Macro Landscape

Anil Rego, Founder & Fund Manager of Right Horizons PMS, emphasizes caution amid policy shifts. He views RBI’s rate cut cycle as front‑loaded and now transitioning to a wait‑and‑watch mode Reuters.

Pillars of Investment Resilience

• Strong government capex through the National Infrastructure Pipeline fueling industrial demand.
  
• Rural and semi‑urban demand holding up, even as urban consumption is patchy.
  
• Liquidity ease post-CRR cuts, keeping credit lines open—but credit growth stays under 10%.
  

Key takeaway: Domestic resilience and fiscal muscle matter more than short-lived global jitters.

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Small‑Cap Opportunity in a Stock‑Picker’s Market

Equitree Capital calls this environment a stock‑picker’s market, especially for small and micro‑caps trading below intrinsic value, despite tariff shocks Business Today+8Business Today+8Equitree Capital+8.

Why Small‑Caps Still Shine

• Equitree’s Emerging Opportunities PMS delivered ~56% in six months and ~80% in one year, outperforming broader indices in volatile phases Equitree Capital+6Business Today+6AIF & PMS Experts+6.
  
• Portfolio P/E at ~12–16× forward earnings, with a PEG of ~0.6 and minimal leverage (D/E ~0.2). That’s “growth at reasonable price” The Economic TimesPMS Aif World.
  

Structural Tailwinds

• Schemes like PLI, GST formalisation, IBC reforms, and a ₹1.5‑trn infrastructure push are anchoring long-term growth.
  
• Equitree positions ~70% in industrial, auto-ancillaries, agri‑equipment, chemicals and infrastructure—echoing India’s manufacturing pivot Moneycontrol.
  

Key takeaway: Small‑caps still offer alpha potential when chosen selectively, especially under deep value themes.

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Contrarian Strategy & Sector Allocation by Rego

Anil Rego has long preferred contrarian bets—often early into underrated but structurally sound businesses. At Right Horizons, he combines this with risk discipline across macro cycles Reuters+8Right Horizons PMS+8PMS Aif World+8.

Portfolio Guidelines from Right Horizons

• Focus on sectors underpriced due to short-term pessimism but strong fundamental growth.
  
• Hedging with defensive assets: consumer staples, healthcare, and a dose of gold for safe‑haven protection in uncertain times mint.
  
• Manage cash buffer (~14–15%) to deploy into volatility or cyclicals during entry points.
  

Key takeaway: Contrarian investing works when you balance patience with portfolio defense.

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Practical Tips for Investors

These takeaways reflect a blend of RBI policy signals and fund‑manager strategy:

• Track inflation and global data rather than assuming rate action—RBI has moved neutral for now.
  
• Look for deep‑value opportunities in small‑caps trading at 10–15× earnings, especially in industrial themes.
  
• Allocate thoughtfully: ~20% to small-caps where high return potential exists; rest across large/mid caps or resilient sectors Reuters+1cafemutual.com.
  
• Keep liquidity handy, so you can act when markets correct or opportunities arise.
  

Key takeaway: Your portfolio should mirror how professional investors like Rego and Equitree think—data-led, opportunity‑focused, but risk-aware.

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What Lies Ahead for FY26 and Beyond

Anil Rego suggests FY26 earnings growth may reach ~25–30%, especially in industrial pockets. Inflation is projected near 3.1%, leaving RBI room—but little need—for more aggressive easing unless growth falters Moneycontrol+3Reuters+3Right Horizons+3.

• Rate-sensitive sectors like real estate, banking, infrastructure and autos could benefit.
  
• Policymakers continue citing global trade risks and volatile capital flows; but India’s mix of exports and domestic demand helps buffer shocks.
  

Key takeaway: Growth-supportive but cautious environment could reward structurally positioned investors.

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What You Should Remember

• RBI has front-loaded rate cuts to 5.5% and shifted to a neutral, data-dependent approach.
  
• Strong macro underpinnings and low inflation offer breathing space—but global risks persist.
  
• This is a stock-picker’s market: deep-value small and micro cap opportunities exist, especially in industrial sectors.
  
• Anil Rego’s contrarian, disciplined strategy—combined with Equitree’s focused small-cap thesis—provides a model for informed, resilient investing.
  

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Call to Action

Curious how a contrarian small-cap PMS works in today’s RBI‑led environment? Share your portfolio mix or questions in the comments below — let’s unpack how granular stock‑picking can fit into your long‑term plan.