RBI Rate Cut Sparks Market Rally as Sensex Gains 450 Points and Nifty Nears 26,200
Markets Cheer RBI’s Growth-Driven Rate Cut as Sensex Rises 447 Points and Nifty Ends Near 26,200
| Index | Price | Change | % Chg |
| Nifty 50 | 26,186.45 | 152.70 | +0.59% |
| Nifty Bank | 59,777.20 | 488.50 | +0.82% |
| Nifty Financial | 27,881.90 | 270.45 | +0.98% |
| BSE SENSEX | 85,712.37 | 447.05 | +0.52% |
Indian equity markets ended Friday’s session on a strong note as investors responded positively to the RBI’s 25-basis-point repo rate cut, lifting the benchmark indices into the green after a muted start. The Sensex closed 447 points higher, while the Nifty 50 settled near 26,200, with financials, IT, and auto stocks leading the charge. The session marked a decisive shift in sentiment after weeks of cautious trade driven by global uncertainty and domestic growth concerns.
The RBI’s decision to reduce the repo rate from 5.50% to 5.25% and sharply raise the FY26 GDP growth forecast to 7.30% sent a message of calibrated confidence in India’s economic trajectory. The monetary policy committee maintained a neutral stance but signalled room for future accommodation if inflation continues to ease.
Also Read : Market Experts Reveal 10 Stocks Likely to Gain From RBI’s Rate Cut and Higher GDP Estimate
Friday’s policy announcement highlighted the central bank’s renewed focus on supporting liquidity and credit markets. Governor Sanjay Malhotra’s declaration of a ₹1 lakh crore Open Market Operations (OMO) programme and a $5 billion forex swap underscored the RBI’s commitment to easing funding stress. These measures are aimed at lowering system-wide borrowing costs, enabling smoother transmission of the repo rate cut, and stabilising financial conditions.
Analysts said the RBI’s tone was “growth-supportive and measured,” pointing out that the rate cut was well aligned with the latest macroeconomic indicators.
Headline inflation dropped to a record low of 0.25% in October
Q2FY26 GDP surged to 8.2%, reflecting strong domestic demand
The RBI now estimates inflation at 2% for FY26 and 3.9% for Q1FY27, significantly softer than previous projections.
Rate-sensitive pockets of the market—banking, auto, and real estate—reacted immediately to the announcement. Private and public-sector banks gained amid expectations of treasury profits and improved liquidity conditions, though concerns around near-term net interest margins (NIMs) kept gains modest for some lenders.
By the close:
Nifty 50 rose 0.59% to 26,186.45
Sensex climbed 0.52% to 85,712.37
Bank Nifty jumped 0.82% to 59,777.20
Top gainers on the indices included SBI, Bajaj Finance, Bajaj Finserv, Maruti Suzuki, HCL Technologies, and Infosys, all of which benefited from improved rate expectations and supportive sectoral cues.
However, small-cap and mid-cap indices underperformed for the week, down 1.8% and 0.7% respectively, reflecting continued caution at the broader market level.
Indian IT shares rallied for the third consecutive session as global markets priced in a rising probability of a rate cut by the US Federal Reserve at its upcoming FOMC meeting scheduled for December 9–10. A Reuters poll of over 100 economists suggested increasing confidence that the Fed may ease by 25 basis points, reversing earlier expectations of a prolonged pause.
HCLTech and Mphasis led the Nifty IT index higher, supported by hopes of improved client spending and lower global funding costs. Analysts believe that any easing by the Fed could further strengthen sentiment for export-oriented Indian technology firms.
Shares of Indian Renewable Energy Development Agency (IREDA) continued their downtrend, slipping more than 2% to ₹133.5, marking the seventh straight session of losses. The stock has now corrected 58% from its all-time high of ₹310, hit in July 2024. Weak investor sentiment, profit-taking, and sector-specific concerns have weighed on the state-run renewable financier in recent weeks.
Despite strong closing levels, market breadth remained weak:
Advancers: 1,335
Decliners: 1,769
52-week Highs: 36
52-week Lows: 249
Volatility eased, with India VIX falling 4.64% to 10.32, indicating reduced fear and improved stability.
Global markets ended the day on a mixed note, with Asian indices struggling for clear direction amid subdued cues from Wall Street and caution ahead of key central bank decisions. Japan’s Nikkei 225, which had enjoyed three consecutive sessions of gains, retreated as automobile stocks weighed on sentiment. In contrast, South Korea’s KOSPI emerged as the regional outperformer, supported by strength in electronics, battery makers, and large-cap tech names. Overall, the region reflected a cautious mood, with investors balancing optimism around potential global rate cuts against lingering uncertainties in trade flows and geopolitical risks.
The Indian rupee slipped 5 paise to 89.94 against the US dollar following the RBI’s decision, reflecting knee-jerk volatility. In intraday trade, the currency briefly tested the 90-per-dollar level, a psychological barrier breached earlier in the week. By the close, the rupee steadied near 89.98, with traders noting that the rate cut largely offset upward dollar pressure.
Currency markets reacted swiftly to the RBI’s rate cut, with the rupee edging lower as traders weighed the immediate impact of reduced interest rate differentials. The domestic currency slipped a few paise against the US dollar, briefly testing the psychologically important 90-mark before stabilising toward the close. While the rate cut introduced short-term volatility, analysts noted that supportive liquidity measures and improving macro fundamentals helped prevent a sharper decline. The rupee’s modest movement reflects a balanced market response, with participants now watching global cues—particularly the US Federal Reserve’s upcoming decision—for further direction.
TECHM (+1.51%)
HDFCLIFE (+1.49%)
TCS (+1.48%)
SBILIFE (+1.41%)
BEL (+1.25%)
INDIGO (-2.39%)
RELIANCE (-0.88%)
HINDALCO (-0.65%)
MARUTI (-0.64%)
TITAN (-0.62%)
IT (+0.90%)
AUTO (+0.74%)
METAL (+0.67%)
REALTY (+0.34%)
OIL & GAS (+0.13%)
MEDIA (-0.48%)
CONSUMER DURABLES (-0.07%)
PHARMA (-0.05%)
FMCG (-0.01%)
Analysts say the RBI’s unexpected rate cut has ignited a clear ‘risk-on’ sentiment across the markets, shifting investors firmly toward equities after weeks of caution. The sharper-than-expected drop in inflation and an upgraded GDP outlook gave the central bank room to ease policy, signalling confidence in India’s economic trajectory. This has particularly boosted rate-sensitive sectors such as banks, autos, and real estate, which are now seen as near-term outperformers. While treasury gains and improved liquidity support optimism, experts caution that global variables—especially the US Fed’s stance and external trade pressures—will remain key in determining how long the risk-on momentum lasts.
Experts highlighted several themes:
Rate-sensitive stocks (banks, autos, real estate) likely to outperform
Treasury gains may support private banks
NIM pressures remain a near-term risk
Corporate earnings in December will be crucial
Global trade tensions, a widening current account deficit, and the US Fed’s December meeting remain key risk factors for sustaining the rally.
The RBI’s latest policy move has drawn strong praise from the banking sector, which views the 25-basis-point repo rate cut and liquidity-boosting measures as timely and growth-supportive. Bankers noted that the ₹1 lakh crore OMO purchases and the USD buy-sell swap demonstrate the central bank’s clear intent to ease funding pressures and improve monetary transmission at a critical juncture. Many highlighted that lower borrowing costs will help revive demand across key segments such as housing, MSMEs, and auto loans, while reinforcing overall credit growth, which remains healthy. The sector believes the policy sets the stage for stronger financial stability and improved credit accessibility in the months ahead.
Indian Overseas Bank issued a statement welcoming the move, noting that the rate cut will ease borrowing costs, stimulate demand in housing, auto, and MSME sectors, and improve credit flow.
The markets wrapped up the week on a confident note, buoyed by the RBI’s supportive policy stance and renewed optimism across rate-sensitive sectors. After days of cautious trading, investors welcomed the clarity on growth and liquidity, helping the indices sustain their upward momentum into the close. While the upbeat finish signals strengthening sentiment, the coming weeks will be shaped by global cues, especially the US Federal Reserve’s policy outlook, and domestic earnings data. For now, the tone remains constructive, with markets positioned to build on this momentum if macro conditions stay favourable.
The RBI’s policy easing is expected to reduce borrowing costs, improve liquidity, and revive consumer demand—especially for home loans, auto finance, and business credit. These sectors typically respond quickly to lower rates and may witness improved volumes and margin stability in the upcoming quarter.
The domestic rally came from strong macro data, sharp inflation moderation, and the RBI’s clear message of supporting growth through liquidity measures. These positives outweighed global concerns, leading Indian markets to outperform peers even as global cues remained mixed.
A higher GDP growth outlook signals sustained economic momentum, stronger corporate earnings potential, and expanding investment opportunities across sectors. For long-term investors, this reinforces confidence in holding quality stocks that benefit from economic expansion.
Indian IT firms have rallied for three straight sessions, driven by hopes that a Fed rate cut will revive global tech spending, improve client budgets, and support currency stability. Softer US rates typically benefit Indian IT exporters by boosting demand visibility.
Although liquidity support stabilises funding conditions domestically, a near-term rate cut narrows interest-rate differentials with global markets, triggering mild weakness in the rupee. However, the currency stabilised quickly as the RBI’s forex measures offset selling pressure.
Market risks include widening current account deficit, global trade tensions, volatile crude prices, and the US Federal Reserve’s policy stance. These external factors may create near-term uncertainty even as domestic fundamentals remain strong.
Small and mid-caps have seen profit-taking after extended rallies, while valuation concerns and liquidity concentration in large caps have kept broader indices under pressure. Investors are shifting temporarily toward safer large-cap names amid macro policy shifts.
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