Indian equity markets ride the RBI rate cut tide to recoup losses

Indian equity markets ended the week on a high note, propelled by the Reserve Bank of India’s (RBI) unexpected move to slash the repo rate by 50 basis points (bps) and the cash reserve ratio (CRR) by 100 bps.

The aggressive policy easing reversed two weeks of negative sentiment, sparking a strong rally across sectors. The Nifty surged past the 25,000 mark closing at 25,003.05 after rising 252.15 points, or 1.02 per cent. While the Sensex gained 746.95 points, or 0.92 per cent, to close at 82,188.99, marking one of the strongest weekly performances in recent times.

Rate-sensitive sectors drive gains

The RBI’s policy, coupled with a shift in stance from ‘accommodative’ to ‘neutral’, signalled a decisive pro-growth pivot, igniting optimism among investors.

The Nifty Realty index surged 4.68 per cent, emerging as the top-performing sector, as hopes of a housing demand revival gained momentum. Financials followed closely, with the Nifty Bank and Financial Services indices climbing 1.5 per cent and 1.75 per cent, respectively, driven by gains in top lenders and NBFCs. Auto stocks also rallied, contributing to the upbeat sentiment.

Market heavyweights HDFC Bank and Bajaj Finance were among the biggest individual contributors to the Nifty’s rally, adding 48 and 25 points, respectively. Axis Bank, M&M, and Shriram Finance also featured prominently among the top gainers.

Meanwhile, the broader markets outperformed, with the Nifty Midcap index rising 3 per cent for the week and 1.2 per cent on June 6 alone. The Nifty Smallcap index added 0.8 per cent.

Investors add ₹3.6 lakh crore in a single session

The RBI’s dovish stance had an immediate impact on investor wealth. The market capitalisation of BSE-listed companies jumped by ₹3.6 lakh crore (nearly $42 billion) in Friday’s session alone, pushing total market cap to ₹451.1 lakh crore (almost $5,262 billion).

The advance-decline ratio remained robust at 3:2, signalling widespread investor participation. In total, 46 out of the 50 Nifty stocks posted gains during the week, with some surging over 10 per cent.

Notably, gold loan financiers like Muthoot Finance saw strong buying interest as the RBI hinted at easing norms for unsecured loans, further lifting sector sentiment.

Markets eye further upside; analysts advise caution

Despite the week’s strong gains, analysts maintain a cautious optimism. The Nifty, while still in a consolidation phase, is now eyeing a breakout above the 25,200 level. A decisive move beyond this could pave the way for a fresh rally towards 25,600. Technical indicators remain supportive, particularly with the Nifty Bank index touching a new 52-week high of 56,584.

Volatility also declined, with the India VIX falling over 2 per cent, indicating cooling risk perception. Meanwhile, the RBI’s decision to lower the CPI inflation forecast for FY26 to 3.7 per cent further strengthened the case for an extended easing cycle.

Looking ahead, rate-sensitive sectors like financials, realty, and auto are expected to stay in focus. Themes like infrastructure and railways could also benefit from the evolving pro-growth environment.