Indian equity markets traded with renewed energy on Friday after the Reserve Bank of India’s latest policy move injected optimism across rate‑sensitive sectors.
The RBI cut the benchmark repo rate by 25 basis points, bringing it down to 5.25 per cent, a decision aimed at further stimulating economic growth even as the rupee remains under pressure.
The announcement, part of the central bank’s fifth bi‑monthly monetary policy review, initially triggered volatility, but both benchmark indices regained strong momentum soon after.
By l 12:14 PM, the 30‑share BSE Sensex surged close to 300 points and crossed 85,500, while the NSE Nifty 50 advanced almost 100 points to trade above 26,100.
RBI Prioritises Growth Despite Rupee Concerns
The central bank’s move comes as India’s GDP growth hit a six‑quarter high of 8.2 per cent in the second quarter of FY25. Addressing the media, RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) voted unanimously to reduce the short‑term lending rate, maintaining a neutral policy stance.
The decision signals the MPC’s confidence in India’s growth trajectory, even as the depreciating rupee raises import‑cost concerns.
According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the unanimous vote underscores the panel’s belief that “giving a further boost to growth is a risk worth taking” in the present macroeconomic environment.
Santosh Meena, Head of Research at Swastika Investmart, said that the decision ‘capitalises on a “Goldilocks” economic scenario, high growth paired with benign inflation’.
“Ultimately, the policy prioritises domestic expansion over external currency defense, signalling a continued favorable environment for borrowers and equity investors alike. The RBI has revised its full‑year growth forecast upward to 7.3 per cent, compared with 6.8 per cent projected earlier, a revision welcomed by equity markets,” Meena said.
Rate‑Sensitive Stocks Lead The Charge
Financials and technology counters were among the key gainers following the rate cut. Heavyweights such as Bajaj Finance, Infosys, HCL Tech, Bajaj Finserv, SBI, Tata Consultancy Services, and HDFC Bank rallied ahead..
Rate‑sensitive sectors, particularly automobile and real estate stocks, also traded higher as investors priced in the likelihood of cheaper retail and commercial loans. Home‑loan and auto‑loan–linked scrips saw increased interest from domestic traders.
However, not all index stocks participated in the rally. Hindustan Unilever, TMPV, Trent, Sun Pharma, and Eternal were among the laggards.
Foreign Flows Mixed; DIIs Step Up Buying
Foreign Institutional Investors (FIIs) continued to trim holdings, offloading Rs 1,944.19 crore worth of equities on Thursday. In contrast, Domestic Institutional Investors (DIIs) remained strong buyers, purchasing Rs 3,661.05 crore, helping support market sentiment.
Global cues added a mixed flavour to the morning trade. Asian markets showed divergent trends, with South Korea’s Kospi and Shanghai’s SSE Composite trading higher, while Japan’s Nikkei 225 and Hong Kong’s Hang Seng moved lower. Overnight, US markets ended largely flat.
Meanwhile, Brent crude, the global oil benchmark, slipped 0.16 per cent to $63.16 per barrel, providing relief for oil‑import‑dependent India.
Rate Cut To Enhance Liquidity
With the RBI’s rate cut offering fresh momentum, analysts expect near‑term sentiment to remain constructive. Lower borrowing costs typically translate into stronger credit demand, improved liquidity, and a healthier investment climate.
N ArunaGiri, CEO, TrustLine Holdings, said that the MPC’s rate cut signals two important takeaways. “The central bank appears highly confident about the inflation trajectory for FY27, not just on the headline print but also on core inflation. As the Governor highlighted, after adjusting for the huge uptick in the precision metals and bullion, core inflation is expected to remain favourable. That is a huge positive. Second, the RBI seems to believe that the recent sharp fall in the rupee is overdone. The policy language implicitly suggests that the currency is undervalued at current levels and may gradually normalise,” the expert added.
However, global uncertainties remain, from the trajectory of crude prices to policy outlooks in major economies. For now, the Indian market appears firmly focused on the domestic growth story, buoyed by a central bank keen to support expansion while maintaining financial stability.
