Markets: With RBI’s significant rate-cut, Sensex, Nifty up 1%
Virendra Pandit
New Delhi: India’s benchmark equity indices surged on Friday after the RBI cut interest rates by more-than-expected 50 basis points — a third consecutive reduction — and reduced the cash reserve ratio (CRR) for banks to provide a major liquidity fillip to support the economy amid geopolitical and tariff headwinds.
Recovering all the early lost ground, the 30-share BSE Sensex jumped 746.95 points, or 0.92 percent, to settle at 82,188.99. The 50-share NSE Nifty reclaimed the 25,000-level and climbed 252.15 points, or 1.02 percent, to settle at 25,003.05.
With the latest rate-cut, the RBI has reduced interest rates by a total of 100 basis points in 2025, starting with a quarter-point reduction in February — the first cut since May 2020 — and another similar-sized cut in April.
The RBI’s Monetary Policy Committee (MPC) changed policy stance to ‘neutral’ from ‘accommodative.’ Governor Sanjay Malhotra said, having reduced the benchmark policy repo rate by 100 basis points (bps) in quick succession since February 2025, under the current circumstances, the monetary policy is now left with “very limited space” to support growth.
“Hence, the MPC also decided to change the stance from accommodative to neutral. From here onwards, the MPC will be carefully assessing the incoming data and the evolving outlook to chart out the future course of monetary polic to strike the right growth-inflation balance,” he said.
The fast-changing global economic situation too necessitates continuous monitoring and assessment of the evolving macroeconomic outlook.
While the MPC front-loaded the repo rate cut by 50 bps, its member Saugata Bhattacharya voted to reduce the policy rate by 25 bps.
The RBI has lowered interest rates by a deeper-than-expected half a percent – the third cut in a row amid falling inflation and lower growth in Asia’s third largest economy.
It also increased the amount of liquidity – or supply of money – available in the system.
The repo rate – the level at which the central bank lends money to commercial banks, influencing borrowing costs for home and car loans – now stands at 5.5 percent, the lowest in three years.
Explaining the rationale for the cut, Malhotra said growth is “lower than our aspirations” and the bank felt it was “imperative to stimulate domestic consumption and investment” amid rising global uncertainties, the media reported.
Data released last week showed that India’s economy grew by 6.5 percent in the previous financial year ending March 2025.
The country remains the world’s fastest expanding major economy, although growth has sharply dropped from the 9.2 percent high recorded in financial year 2023-24.
Meanwhile, retail prices in India have slowed faster than expected to 3.16 percent in April – the lowest in six years – and below the RBI’s 4 percent target, driven down by falling food prices.
RBI has now forecast lower inflation than earlier projected for the year ahead.
Fuller granaries due to a better-than-expected and early monsoon, weaker prices of commodities like oil – of which India is a net importer – as well as a strong currency are likely to help keep its inflation in check in the months ahead, allowing the RBI to keep rates low.
Lower borrowing costs could have a positive growth impact due to improved purchasing power for households, lower input costs for companies and lower debt servicing costs for the government.
They will also help homebuyers and a struggling real estate sector.
