New Delhi, Oct 7 (NationPress) The outlook for India's growth and inflation creates room for additional monetary support from the Reserve Bank of India (RBI), with the upcoming December policy review potentially acting as the last chance for a rate cut in the current easing cycle, according to a recent report.

The prevailing macroeconomic climate offers sufficient leeway to maintain supportive monetary and liquidity conditions for growth, and hence there is no basis at this time to predict a policy reversal, stated SBI Funds Management Limited in its analysis.

The RBI’s neutral approach and balanced risk evaluation continue to bolster prospects for further easing while ensuring liquidity remains conducive to growth. Market participants should be prepared for external volatility and shifting expectations, the asset management firm emphasized.

SBI Funds also pointed out that Indian equities have been in a phase of sideways consolidation for over a year, narrowing the earnings-yield to bond-yield spread to historical averages and tempering the exuberance seen in the previous year.

These developments are favorable indicators, implying that the excesses previously embedded in equity prices are being rectified, as noted in the report.

However, the firm cautioned that earnings growth is under pressure, as declining nominal GDP growth has negatively impacted corporate earnings.

Additionally, SBI Funds maintained a neutral stance on large-cap stocks, anticipating a gradual earnings recovery amid a fluctuating global environment.

Regarding fixed-income assets, the report highlighted that the RBI's policy review offered a more balanced risk assessment, which should buoy market sentiments.

Short-duration high-quality bond funds continue to yield greater accruals, wider spreads, and an optimal risk/reward profile, presenting opportunities for the coming months and into the next year, the firm advised.