RBI’s surprise 50 bps rate cut propels Sensex, Nifty to fresh highs; banking stocks lead rally 

Markets surged on Friday as the Reserve Bank of India delivered a surprise 50 basis point repo rate cut to 5.5 per cent, coupled with a 100 basis point reduction in the cash reserve ratio to 3 per cent.

The Sensex closed 746.95 points or 0.92 per cent higher at 82,188.99, while the Nifty 50 climbed 252.15 points or 1.02 per cent to 25,003.05, marking its first close above the psychological 25,000 level in several sessions.

The central bank’s aggressive monetary easing caught markets off guard, triggering a sharp rally in rate-sensitive sectors. Banking, financial services and realty indices led the charge, with the Nifty Bank surging 817.55 points or 1.47 per cent to 56,578.40, while the Nifty Financial Services index jumped 461.75 points or 1.75 per cent to 26,848.90.

“Markets rallied after the Reserve Bank of India announced a 50 basis point cut in the benchmark repo rate, bringing it down to 5.5 per cent. The central bank also reduced the cash reserve ratio (CRR) by 100 basis points to 3 per cent. Despite these accommodative measures, the RBI maintained its GDP growth forecast for FY2025–26 at 6.5 per cent,” said Sundar Kewat, Technical and Derivatives Analyst at Ashika Institutional Equity.

Among individual stocks, Shriram Finance emerged as the top gainer on the Nifty 50, surging 5.46 per cent to close at ₹687. Bajaj Finance followed with a 4.90 per cent gain to ₹9,372, while JSW Steel climbed 3.56 per cent to ₹1,003.20. Axis Bank gained 3.15 per cent to ₹1,195.50, and Maruti Suzuki rose 2.78 per cent to ₹12,463.

Only four stocks declined on the Nifty 50, with HDFC Life leading the losers with a 0.87 per cent drop to ₹755. Bharat Electronics Limited fell 0.66 per cent to ₹390.90, Bharti Airtel declined 0.46 per cent to ₹1,870.10, and Sun Pharma slipped 0.13 per cent to ₹1,680.90.

The broader market momentum was equally strong, with 2,278 stocks advancing against 1,744 declines on the BSE. A total of 119 stocks hit 52-week highs, while only 43 touched 52-week lows. The Nifty Midcap 100 gained 707.30 points or 1.21 per cent to 59,010.30, while the Nifty Next 50 rose 845.75 points or 1.26 per cent to 67,992.85.

“The tremendous rate cut and liquidity boost via the CRR cut is expected to facilitate swift transmission of lower rates, reinforcing RBI’s strong commitment to fostering economic growth, boosting investment, and stimulating consumption,” said Vinod Nair, Head of Research at Geojit Investments Limited.

The rupee strengthened significantly following the RBI’s policy announcement, appreciating 17 paise to 85.65 against the dollar. “The rupee appreciated to 85.65, gaining 17 paise, supported by the RBI’s cumulative 1 per cent (100 bps) rate cut over the past three policy meetings, including the latest 50 bps cut. This aggressive easing stance has injected liquidity and improved investor sentiment,” noted Jateen Trivedi, VP Research Analyst at LKP Securities.

Foreign institutional investors continued their buying streak, pumping in ₹4,575.59 crores in the first five days of June 2025. However, FPI flows remained mixed across emerging markets, with India witnessing outflows of $445 million during the period, according to Shrikant Chouhan, Head Equity Research at Kotak Securities.

In commodities, gold futures slipped to $3,362 per ounce on COMEX as the US dollar rebounded, while WTI crude oil prices surged to $64 per barrel following positive developments in US-China trade talks.

“WTI crude oil prices surged to $64 per barrel following a telephone conversation between US President Donald Trump and Chinese President Xi Jinping on Thursday. The leaders discussed efforts to resolve trade disputes and agreed to continue trade negotiations, boosting market sentiment,” said Kaynat Chainwala, AVP-Commodity Research at Kotak Securities.

The RBI’s policy stance remained neutral despite the aggressive rate cut, with Governor maintaining the GDP growth forecast at 6.5 per cent for FY2025-26.

“The RBI’s neutral stance moderated expectations for future rate cuts and concerns linger over current tepid demand, as reflected in the unchanged GDP growth forecast for FY26,” Nair added.

Technical analysts remain optimistic about the market’s near-term trajectory. “The stock index has moved up sharply following a bazooka policy move by the RBI. It closed above the 25,000 mark after several sessions, indicating a surge in optimism among market participants,” said Rupak De, Senior Technical Analyst at LKP Securities.

Looking ahead, market participants expect rate-sensitive sectors to continue driving the rally. “A decisive breakout above the 25,200 mark in the Nifty could trigger the next leg of the rally, potentially pushing the index toward the 25,600 level. Going forward, the impact of the rate cut is expected to continue influencing market sentiment. Rate-sensitive pack, along with select themes like railways, are likely to stay in focus,” said Ajit Mishra, SVP Research at Religare Broking Ltd.

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Published on June 6, 2025