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RBI Cuts Repo Rate, Changes Stance to Neutral; Sensex, Nifty50 React Positively

 

The Indian stock market is seeing strong gains this Friday. After a choppy start to the day, investors have welcomed the Reserve Bank of India’s (RBI) latest monetary policy decisions. This includes a sharp rate cut and new steps to inject liquidity into the economy. 

 

RBI Surprises with Bold Rate Cut 

 

The RBI’s Monetary Policy Committee (MPC) has taken an unexpected but bold step by cutting the repo rate—the interest rate at which the RBI lends money to commercial banks—by 50 basis points (0.50%). This brings the new repo rate down to 5.50%, from the earlier 6%. 

In another big move, the RBI also announced a 100-basis-point cut in the Cash Reserve Ratio (CRR). This change will be rolled out in four phases. The CRR is the portion of deposits that banks must keep with the RBI. Cutting the CRR means banks will have more money to lend, which increases liquidity in the financial system. 

Along with these changes, the RBI also shifted its policy stance from ‘Accommodative’ to ‘Neutral’, signaling that future rate moves will depend on how the economy performs. The central bank’s decisions reflect concerns about global economic growth and the need to support domestic demand. 

 

Market Reaction: Sharp Rally After Policy Update 

 

After the policy announcement, the stock market turned sharply higher. Key indices jumped as rate-sensitive sectors saw a surge in buying interest. 

The BSE Sensex is trading at 82,051, up 609 points or 0.75%. 

The Nifty50 is at 24,956, rising 205 points or 0.83%. 

The gains are broad-based, with both large-cap and small-cap stocks participating in the rally. 

The Nifty MidCap index is up by 0.5%. 

The Nifty SmallCap index also gains 0.5%. 

This positive sentiment shows that investors are optimistic about the RBI’s steps to support growth and improve liquidity. 

 

Banking Stocks Hit New Highs 

 

The biggest winners today are banking stocks. The Nifty Bank index has jumped 1.5%, hitting a new all-time high of 56,433. Lower interest rates help banks because they can borrow more cheaply and lend more, boosting profits. 

Public sector banks like SBI, Punjab National Bank, and Bank of Baroda are trading higher. Private sector banks such as HDFC Bank, ICICI Bank, and Axis Bank are also among the top gainers. 

The rally in banking stocks reflects investor confidence in the sector’s growth potential, especially with more liquidity entering the system through the CRR cut. 

 

Real Estate and Auto Stocks in Focus 

 

Alongside banking, the real estate and automobile sectors are seeing strong gains. 

The Nifty Realty index is up by 3%, making it one of the top-performing sectors today. Lower interest rates are good news for the housing market, as they make home loans cheaper and more attractive. Stocks like DLF, Godrej Properties, and Oberoi Realty are witnessing solid buying. 

The Nifty Auto index is up 1%. Lower loan rates are expected to boost demand for vehicles. Auto giants like Maruti Suzuki, Tata Motors, and Hero MotoCorp are trading higher. 

These sectors benefit directly from reduced borrowing costs, and the rally reflects investors betting on a pickup in consumer demand. 

 

Other Sectors: Mixed Trends 

 

While most sectors are trading in the green, some are seeing only mild gains or flat moves. 

IT stocks are underperforming slightly, as global uncertainties continue to weigh on technology companies. 

Pharmaceutical stocks are also muted, with no major triggers in play. 

However, the overall market tone remains positive, with strong participation across financials, real estate, and consumption-driven sectors. 

 

What’s Driving Market Optimism 

 

The market rally is driven by a few key factors: 

RBI’s Aggressive Rate Cut 

The 50-bps rate cut was bigger than expected. It shows the central bank’s commitment to supporting the economy. 

CRR Cut to Boost Liquidity 

The phased CRR cut means banks will have more funds to lend, helping boost credit growth. 

Neutral Stance Signals Flexibility
 
By shifting to a neutral stance, the RBI has left the door open for more rate cuts or policy changes depending on future data. 

Strong Support for Rate-Sensitive Sectors 

Banks, real estate, and auto stocks are directly benefiting from the rate cut, attracting strong investor interest. 

 

What to Watch Going Forward 

 

Investors are likely to focus on the following over the next few days: 

RBI commentary and future guidance: Any signals on inflation and growth forecasts will be important. 

Corporate earnings: June quarter results are approaching, and companies in the banking, auto, and FMCG sectors will be closely watched. 

Global factors: U.S. jobs data, oil prices, and interest rate decisions in other major economies can influence Indian markets. 

Monsoon progress: Rainfall patterns in June are crucial for rural demand and agriculture-linked stocks.

 

Bullish Momentum Returns 

 

Today’s market action shows that investor confidence is returning after a few sessions of uncertainty. The RBI’s policy decisions—especially the larger-than-expected rate cut and the CRR reduction—have lifted sentiment. 

With the Sensex crossing 82,000 and the Nifty nearing 25,000, markets are showing strength and resilience. The strong gains in banking, real estate, and auto stocks reflect hopes of rising consumer spending and faster credit growth in the months ahead. 

While some caution remains around global factors, the mood on Dalal Street today is upbeat, and the rally may continue if supportive data and earnings follow in the coming weeks.