Bulls shift to top gear on RBI's turbocharged rate cut; Nifty cruises past 25K

Equity markets surged for the third straight session, riding high on a bigger-than-expected rate cut by the RBI, coupled with a CRR reduction. The rally was further boosted by upbeat cues from Asian markets. The Nifty closed above the 25,000 mark, with strong gains seen in realty, metal, and banking stocks.

The S&P BSE Sensex surged 746.95 points or 0.92% to 82,188.99. The Nifty 50 index jumped 252.15 points or 1.02% to 25,003.05. In the three trading sessions, the Sensex and Nifty have risen 1.8% and 1.88%, respectively.

Bajaj Finance (up 4.93%), JSW Steel (up 3.70%) and HDFC Bank (up 1.42%) boosted the indices.

In the broader market, the S&P BSE Mid-Cap index rose 0.91% and the S&P BSE Small-Cap index added 0.43%.

The market breadth was positive. On the BSE, 2,278 shares rose and 1,744 shares fell. A total of 134 shares were unchanged.

The NSE's India VIX, a gauge of the market's expectation of volatility over the near term, declined 3% to 14.63.

RBI Monetary Policy Outcome:

The Reserve Bank of India (RBI) cut the policy repo rate by 50 basis points to 5.50%, signaling a shift in its monetary policy stance from accommodative to neutral.

The decision, announced at the conclusion of the Monetary Policy Committee?s (MPC) 55th meeting held from June 4 to 6, 2025, was driven by easing inflation and a stable growth outlook.

With the rate cut coming into effect immediately, the standing deposit facility (SDF) rate now stands at 5.25%, while the marginal standing facility (MSF) rate and the bank rate are adjusted to 5.75%.

This decision is in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth.

To ensure durable liquidity, the central bank also announced a 100 basis points reduction in the cash reserve ratio (CRR) to 3% of net demand and time liabilities (NDTL). The cut will be implemented in four equal tranches of 25 bps each, starting from the fortnights beginning September 6, October 4, November 1, and November 29, 2025. By December, the CRR cut is expected to infuse approximately Rs 2.5 lakh crore of primary liquidity into the banking system.

The RBI maintained its real GDP growth projection for FY26 at 6.5%, with quarterly growth seen at 6.5% in Q1, 6.7% in Q2, 6.6% in Q3, and 6.3% in Q4.

On the inflation front, the RBI revised its forecast downward to 3.7% for FY26 from the earlier estimate of 4%. Quarterly projections suggest CPI inflation at 2.9% in Q1, 3.4% in Q2, 3.9% in Q3, and 4.4% in Q4.

The RBI cited broad-based moderation in inflation over the past six months, with headline CPI now well below target. It noted that both food and core inflation are expected to remain soft, helped by easing global commodity prices amid a global growth slowdown.

Looking ahead, the MPC emphasized a data-dependent approach, stating it will closely monitor evolving domestic and global conditions to guide future policy moves.

The minutes of the MPC meeting will be released on June 20, and the next policy meeting is scheduled from August 4 to 6, 2025.

Numbers to Track:

The yield on India's 10-year benchmark federal paper rose 0.39% to 6.215 from the previous close of 6.211.

In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee was hovering at 85.7000 compared with its close of 85.7950 during the previous trading session.

MCX Gold futures for 5 August 2025 settlement shed 0.02% to Rs 97,854.

The US Dollar Index (DXY), which tracks the greenback's value against a basket of currencies, was up 0.21% to 98.95.

The United States 10-year bond yield shed 0.18% to 4.385.

In the commodities market, Brent crude for August 2025 settlement shed 9 cent or 0.14% to $65.25 a barrel.

Global Markets:

US Dow Jones futures were up 132 points, signaling a positive start for Wall Street.

European market declined on Friday as investors around the world awaited more key data for clues on the shape of the U.S. economy.

Meanwhile, Asian stocks ended higher after a 90-minute phone call between US President Donald Trump and Chinese President Xi Jinping sparked hopes of renewed trade talks. The discussion, centered on rare earth exports, ended with both leaders agreeing to resume negotiations. A US delegation including Scott Bessent, Howard Lutnick, and Jamieson Greer will soon head to China to pick up the dialogue.

Trump called the conversation very good, and both sides even exchanged invitations for state visits.

Back on Wall Street, however, the mood was less upbeat. All three major US indices closed lower overnight. The S&P 500 dropped 0.53%, dragged down by a sharp fall in Tesla shares. The Nasdaq slid 0.83%, and the Dow shed 0.25%.

Tesla plunged over 8% after tensions between Trump and Elon Musk took center stage. Trump said he was very disappointed with Musk, following the Tesla CEO?s public criticism of Trump?s much-touted policy bill. Musk didn?t hold back either, snapping back with, Without me, Trump would?ve lost.

Meanwhile, fresh US labor data showed initial jobless claims climbed to 247,000 last week, up from a revised 239,000. Private sector job growth also slowed, with just 37,000 jobs added in May compared to 60,000 in April.

These figures set the stage for Friday?s crucial nonfarm payrolls report, one that could shape the Fed?s next move.

Stocks in Spotlight:

The Nifty Bank index jumped 1.47% after RBI's rate cut. IDFC First Bank (7.04%), AU Small Finance Bank (3.94%), Axis Bank (3.15%), Bank of Baroda (1.66%), Kotak Mahindra Bank (1.57%), HDFC Bank (1.46%), Punjab National Bank (1.01%), State Bank of India (0.83%), Federal Bank (0.44%), ICICI Bank (0.36%) surged.

Indusind Bank shares jumped 2.59% after Reserve Bank of India (RBI) officials signaled confidence in the lender?s recovery from recent accounting lapses. In the the post-monetary policy press conference today, RBI Deputy Governor J Swaminathan and Governor Sanjay Malhotra noted that the bank has taken corrective steps, including leadership changes, and that the situation should stabilize soon.

Indusind Bank had earlier reported a Rs 1,979 crore impact from misaccounted internal derivative trades and reversed Rs 674 crore in misreported microfinance interest. With the resignation of CEO Sumant Kathpalia and his deputy, the RBI believes the matter is largely under control.

Max Estates rose 0.89%. The company?s board approved a material related party transaction between Max Estates Gurgaon Two (Developer), a wholly-owned subsidiary, and Antara Senior Living (ASLL), a wholly-owned subsidiary of Max India. As part of this arrangement, ASLL will receive a fee from the Developer amounting to 9.5% of the net sales revenue generated from purchasers of the senior living project, excluding applicable taxes. The estimated fee payable for the financial year 2026 is expected to be up to Rs 20 Crores, excluding taxes.

KPI Green Energy rose 3.21% after its parent company, KP Group, signed three strategic Memoranda of Understanding (MoUs) with Delta Electronics to bolster India?s clean energy ecosystem.

Bharti Hexacom dropped 2.96% to Rs 1824 after a domestic brokerage downgraded the stock from 'Buy' to 'Neutral' with a target price of Rs 1,900.

Praj Industries rallied 3.46% after the company secured an international assignment from Enersur SA, one of Paraguay?s leading renewable energy firms, to develop a fully integrated biorefinery project in the South American nation.

Brigade Enterprises gained 1.19% after the company?s wholly owned subsidiary, Brigade Tetrarch announced the incorporation of a Limited Liability Partnership (LLP) named Auraterra Developers LLP.

Indian Renewable Energy Development Agency fell 0.93%. The company informed that its board has approved the opening of the issue of qualified institutional placement (QIP) of equity shares with the floor price of Rs 173.83 per equity share.

Life Insurance Corporation of India (LIC) rose 0.19%. The company announced that its current executive director, Ramakrishnan Chander, has assumed charge as the company's new chief investment officer (CIO), effective immediately.

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