Sensex Up By 700 Points After RBI Cuts Repo Rate By 50 Basis Points

The Indian benchmark indices surged on Friday after the RBI Governor Sanjay Malhotra announced a jumbo 50 bps rate cut — from 6 per cent to 5.5 per cent — and a 100 basis point cut in the Cash Reserve Ratio (CRR), from 4 per cent to 3 per cent.

The immediate effect of the decision was seen on the Indian stock market. The BSE Sensex index was at 82,198, up 756 points or 0.93 per cent. The Nifty50 was at 24,508, up 257 points or 0.99 per cent.

In the broader markets, the Nifty MidCap and the Nifty SmallCap indices were up 1.2 per cent and 0.8 per cent, respectively.

In the Sensex pack, Bajaj Finance, Axis Bank, Maruti Suzuki, Kotak Mahindra Bank and IndusInd Bank were the top gainers. Sun Pharma, Infosys, Nestle India and HCL Tech were the top losers.

“The change in monetary stance from accommodative to neutral also indicates that more rate cuts are unlikely unless the situation warrants. The credit growth that this rate cut will hopefully stimulate will compensate for the dip in margins,” said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.

Madhavi Arora, Chief Economist, Emkay Global, said that the RBI appears to have front-loaded all policy actions, be it higher-than-expected rate cuts or infusing durable albeit staggered liquidity via lower CRRs.

“All of that now implies that the ball is in the banks' court to transmit easier financial conditions faster,” Arora mentioned.

Earlier, the domestic benchmark indices opened flat ahead of the key RBI MPC decision, as buying was seen in the IT and PSU Bank sectors in the early trade. India VIX declined by 4.21 per cent to 15.08, suggesting that the market is pricing in lower volatility in the near term.