RBI policy rate cut lifts markets; Sensex, Nifty rebound

MUMBAI: The Indian stock market ended higher on Friday after the Reserve Bank of India (RBI) cut the policy repo rate by 25 basis points to 5.25 per cent, as the MPC’s outcome served as the key catalyst for the market’s rebound. At the close of trading today, the BSE Sensex ended at 85,712.37, up 447.05 points or 0.52 per cent, while the NSE Nifty50 stood at 26,186.45, up 152.7 points or 0.59 per cent.

Broader markets were mixed, with the Nifty Midcap100 up 0.5 per cent while the Smallcap100 index slipped 0.6 per cent, indicating selective participation.

“Nifty moved higher through the day and ended with a strong, sizable bullish candle on the daily chart. Crucially, the index respected its short-term support at the 20-day EMA and closed above the upward-sloping trendline, drawn by connecting the lows of 25,318 and 25,843 made on 7th and 26th November, respectively. This sustained close above both the key moving average and the trendline reinforces the bullish undertone and signals renewed strength in the index”, Sudeep Shah, Head-Technical and Derivatives Research at SBI Securities.

The Monetary Policy Committee (MPC) of the central bank, led by Sanjay Malhotra, today revised the inflation anticipation for Financial Year 2026 (FY26) down to 2 per cent from 2.6 per cent. It raised the GDP growth projection to 7.3 per cent from 6.8 per cent.

Observing the markets, Siddhartha Khemka, Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd said, “(These) Measures further lifted sentiment in rate-sensitive areas of the market. This led the rupee to strengthen to around Rs 89.96 per USD, as policy moves improved currency sentiment. Buying interest strengthened in financials as lower borrowing costs typically spur credit demand and ease funding pressures.”
Khemka further added that any policy signals or agreements emerging from the discussions may drive stock-specific activity.

“Investors now shift their attention to the US Consumer Price Index data due later today, a key input for the US interest-rate trajectory. Going forward, markets are expected to consolidate with a positive bias, supported by the RBI’s rate and liquidity actions, steady domestic flows and rising expectations of a potential US Federal Reserve rate cut,” he added.

“The RBI Monetary Policy Committee’s outcome served as the key catalyst for the rebound,” said Ajit Mishra, SVP, Research, Religare Broking Ltd.

Vinod Nair, Head of Research at Geojit Investments Limited, added that Indian markets have enthusiastically responded to the RBI’s unexpected 25-bps rate cut. This move seemed unlikely given the strong Q2 GDP data. “This surprise, combined with sharply lower inflation forecasts and supportive liquidity measures, has triggered a risk-on sentiment across equities,” he added.

Nilesh Jain, Head-Technical and Derivatives Research Analyst (Equity Research), Centrum Broking Ltd said, “The volatility index dropped sharply by 11% to 10.50, a level that remains comfortable for bulls. Momentum indicators and oscillators also continue to signal a buying trend on the weekly timeframe”. (ANI)