RBI Governor Sanjay Malhotra on June 6 announced the outcome of the central bank's Monetary Policy Committee's (MPC) meeting. RBI has reduced its policy repo rate by 50 basis points to 5.5 percent, and has changed its stance to 'neutral' from 'accommodative'. RBI also cut the cash reserve ratio (CRR), which banks are required to hold, by 100 basis points to 3% with an aim to accelerate policy transmission and boost lending.
Benchmark indices surged over 1% after the announcement, as the rate cut was higher than the estimated 25 bps cut expected by market analysts. Rate-sensitive sectors like realty, banks and more saw a significant jump in the morning trading hours.
Here’s what analysts say after RBI’s MPC meet outcome:
"Even rain gods can't stop smiling and neither can the markets," said Pallav Bagaria, Director at Sapient Finserv. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, however called the higher-than-expected 50 bps rate cut decision slightly negative from the market perspective for the near-term. "This big rate cut will impact the margins of the banks and, therefore, bank stocks will be under pressure in the near-term. However, the credit growth that this rate cut will hopefully stimulate will compensate for the dip in margins," Vijayakumar said.
Divam Sharma, Founder & Fund Manager at Green Portfolio PMS, noted that the 50 bps rate cut came as a surprise. "The ongoing momentum in domestic consumption, corporate activity, and GDP growth will help sustain the economic trajectory and is a positive signal for the markets. We particularly like niche domestic manufacturing companies that are building in India and gearing up to compete on a global scale. The additional 100 bps cut in CRR is also a positive step, as it encourages banks to lend more freely. With FPI inflows slowing down, this infusion of liquidity is a timely and welcome move." Sharma said.
Marzban Irani, CIO of Fixed Income at LIC Mutual Fund, said that the CRR cut of 100 bps to 3 percent has surprised the markets and is expected to release liquidity of Rs. 2.5 lakh crore. "Recommended to invest in tenure ranging 3 month to 3 year schemes to take advantage of CRR cut," Irani said.
Which stocks to watch out for?
Bajaj Broking noted that Banking and Financial Services, Real Estate and Capital Goods & Manufacturing (especially domestic focus) are the key beneficiaries of MPC's recent decisions.
Commenting on bank stocks, Bajaj Broking said Public Sector Banks (PSBs) could see a rally as they tend to benefit from lower repo rates. Private banks along with NBFC with strong retail focus and good asset quality are also good bets.
"Developers with strong execution capabilities and a presence in the affordable and mid-income housing segments are likely to outperform," the brokerage said. "Niche domestic manufacturing companies that are focused on "Make in India" initiatives and require heavy capital expenditure are worth considering. This could include companies in 5G infrastructure, defense," it further said.
Amit Bivalkar, Founder Director, Sapient Finserv Private Limited, said, "The 50 bps repo rate cut is a strong push from the RBI, especially with the shift to a neutral stance. Sectors like banking, real estate, and consumer will likely benefit. Lower EMIs mean better affordability for borrowers — from home loans to personal loans. The CRR cut, though only for banks, enhances liquidity and helps PSU and private banks gain momentum. Combined with tax relief up to ₹12 lakh, this policy improves disposable income, fuelling consumption. While NBFCs miss out on direct CRR benefits, the overall softening of rates creates room for broader demand recovery."
Narinder Wadhwa, Managing Director & CEO of SKI Capital Services, said the rate cut is expected to have a broad-based positive impact on the markets, especially on rate sensitive sectors. The banking and NBFC sectors will likely benefit directly from lower funding costs and potentially improved credit demand, with stocks like HDFC Bank, ICICI Bank, Bajaj Finance, and State Bank of India (SBI) likely to gain, he said.
Wadhwa added that the real estate and housing finance space is another key beneficiary, as lower interest rates make home loans more affordable, potentially boosting demand for developers like DLF and housing financiers like HDFC Ltd and LIC Housing Finance. The auto sector should also see improved sentiment, with cheaper vehicle loans supporting sales for companies like Maruti Suzuki, Mahindra & Mahindra (M&M), and Hero MotoCorp, he said.
"Consumer discretionary and retail stocks are expected to do well as lower EMIs and better liquidity support consumption, benefiting names like Titan, Trent, and Jubilant FoodWorks. The capital goods and infrastructure sectors may also get a lift if the rate cut translates into an uptick in capex activity, with companies like L&T and Siemens in focus. Meanwhile, export-oriented sectors like IT and pharma may see limited upside as a weaker rupee supports margins, but global trade disruptions could weigh on demand," Wadhwa said.
He however noted that sectors heavily reliant on imports, such as oil & gas and metals, could face margin pressures if the rupee continues to weaken. "FMCG stocks, which typically act as defensives, may underperform in the near term as investors rotate into more cyclical and growth-oriented sectors. Overall, the RBI’s bold action and shift in stance are likely to improve market sentiment and may trigger a broader recovery, particularly in mid- and small-cap stocks. With the door now open for further easing, the focus will shift to how effectively the rate cut is transmitted through the financial system and whether global trade tensions ease in the coming months," he said.
Sonam Srivastava, Founder and Fund Manager at Wright Research PMS, said that RBI's surprise 50 basis point rate cut underscores its strong pivot toward supporting growth, at a time when inflation is under control and global central banks are entering easing cycles. “With real rates still elevated and domestic demand uneven, this move is aimed at unlocking credit growth, reviving private investment, and easing the burden on borrowers. Sectors like housing, autos, banking, and infrastructure are likely to see improved momentum as transmission picks up. It’s also a positive signal for rural and small business credit, where growth has been lagging," Srivastava said.
"Bond markets are expected to rally, especially in the long-duration segment, and we believe this cut sets the stage for a more accommodative environment heading into the second half of the year,” Srivastava further said.
Ramani Sastri, Chairman & MD of Sterling Developers, painted a positive picture for the real estate sector. “As affordable financing remains a key driver of demand in real estate, we welcome the RBI's decision to cut the repo rate by 50 bps, thereby encouraging end-users to make purchase decisions. However, it is important is that the benefits are passed on to borrowers immediately. While homebuyers will be able to secure home loans at lower rates, developers will benefit from low borrowing costs, thereby easing financing pressures. Overall, a rate cut would strengthen market confidence, infuse much-needed liquidity, and also act as a strong signal of policy support for the real estate sector and the broader economy, thereby encouraging investments,” Sastri said.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
