Sensex rebounds 1,160 pts; Nifty tops 25k; key 5 MPC decisions spark D-st rally

Indian benchmark indices scripted a strong rebound on Friday after the Reserve Bank of India (RBI) slashed repo rates by 50 basis points, which came as a positive surprise for Dalal Street. Sanjay Malhotra-led RBI's monetary policy committee also changed its stance to 'neutral' from 'accommodative' earlier.

BSE Sensex rebounded nearly 1,160 points from its day's low at 81,140 to hit high at 82,300, while Nifty50 index soared more than 250 points to regain the 25,000 mark. Fear gauge India VIX also dropped nearly 8 per cent from day's high, while broader markets, BSE midcap and smallcap index were up nearly half a per cent each.

A larger than expected move on the Repo Rate, offset by the hardening of the policy stance, may be seen as a front-loading of future policy action. CRR, on the other hand, is a surprise for the market, said Churchil Bhatt, Executive Vice President - Investment, Kotak Mahindra Life Insurance Company.

Here are the key MPC decisions that sparked the Dalal Street rally on Friday:

1.  RBI slashed interest rate by 50 bps to 5.5 per cent from 6 per cent
2. Inflation outlook for FY26 revised down to 3.7 per cent from 4 per cent
3. RBI revised stance to 'neutral' from 'accommodative'
4. Cash Reserve Ratio to be reduced by 100 bps to 3 per cent from 4 per cent.
5. These measures will inject primary liquidity of Rs 2.5 lakh crores in the system.

The move underscores the central bank’s confidence in inflation being under control and marks a shift toward reviving demand and stimulating credit. Lower borrowing costs are expected to benefit both households and businesses, reinforcing a consumption-led recovery, said Akhil Puri, Partner, Financial Advisory at Forvis Mazars (India).

"Interest rate-sensitive sectors like housing, auto, and real estate, are poised to gain from the improved affordability and sentiment. Consumer durables and discretionary segments may seem a boost, especially in urban markets," he said. However, concerns over a narrowing yield gap between the US and India may arise," he adds.

In the 30-share Sensex pack, 28 stocks were trading in green, while only two were seen in red. Bajaj Finance surged nearly 5 per cent,  while Bajaj Finserv gained 4 per cent. Axis Bank, Maruti Suzuki and Eternal were up 2 per cent each. Sun Pharma and Nestle India were the only laggards.

This policy decision, along with promising economic indicators such as robust GDP growth, improved industrial production, and stable inflation, creates a favorable climate for India's prospects, said Jashan Arora, Director, Master Trust Group. "The gradual CRR reduction will ease the squeeze on cash in the banking system, help monetary policy work better, and support bank profits."

Barring the media and pharma pack, all sectoral indices of NSE were trading in green. Nifty realty index surged more than 4 per cent, while Nifty private bank and financial services indices gained more than 2 per cent each. Nifty auto and metal indices gained more than a per cent on Friday.

The advance decline ratio was inclined in the favour of bulls as 2,186 stocks traded with gains, while 1595 were seen lower. 201 stocks remain unchanged for the day. A total of 362 hit their day circuits on Friday, of which 207 stocks hit upper circuit, while 155 names were locked in the lower circuit limit for the day.

Inflation remains well-anchored, as reflected in the RBI’s downward revision of its FY26 forecast to 3.7% from 4% in the previous meeting. The India Meteorological Department’s projection of an above-normal monsoon also bolsters expectations of benign food inflation, said Vikram Chhabra, Senior Economist, 360 ONE Asset Management.

"Growth remains exposed to persistent risks stemming from elevated geopolitical tensions, deepening geo-economic fragmentation, and ongoing global uncertainty. Against this backdrop, there may be room for a further 25 bps rate cut in the current cycle," he said.

By lowering borrowing costs and freeing up bank liquidity, sectors like real estate, automobiles, and consumer durables are set to thrive. This dual policy move will likely spur lending, investment, and job creation, despite global uncertainties. With stance being neutral, all future RBI events for the next few quarters will be non-events, said Dharan Shah, Founder, Tradonomy.