Sensex settles 450 pts higher, Nifty ends near 26,200: RBI’s 25 bps rate cut among key factors behind market rise

Realty, bank stocks rise amid RBI policy rate cut announcement. 

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26 Aug, 2025 12:21

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The equity benchmarks recovered from early losses on Friday, with the Sensex climbing 450 points and the Nifty moving close to 26,200, as sentiment improved after the Reserve Bank of India (RBI) announced a policy rate cut.

The market had opened on a volatile note amid continued foreign fund outflows and mixed cues from overseas markets.

Rising for the second day in a row, the Sensex advanced 447.05 points or 0.52 percent to settle at 85,712.37. During the day, it jumped 531.4 points or 0.62 percent to 85,796.72. The Nifty climbed 152.70 points or 0.59 percent to 26,186.45.

Bajaj Finance, Infosys and Shriram Finance were among the top gainers in the Nifty50 pack, rising up to 2 perent, while InterGlobe Aviation and Hindustan Unilever declined up to 3 percent.

1) Policy rate cut: RBI’s Monetary Policy Committee (MPC) voted unanimously to reduce the policy rate by 25 basis points to 5.25 percent. A rate cut eases borrowing costs for companies and consumers, which is seen as supportive for economic activity and often lifts equity sentiment.

"The strengthening market outlook due to improving earnings is further supported by the RBI rate cut," Rahul Singh, chief investment officer of equities at Tata Asset Management told Reuters. With a likely U.S. rate cut next week, there is "valuation comfort for Nifty, which is now trading at nearly 21x forward earnings," Singh said.

2) Buying in rate-sensitive stocks: Nifty Financial Services climbed 0.8 percent, while the Bank Nifty and the PSU Bank indices advanced 0.5 percent and 0.8 percent, respectively, following the interest-rate cut. Lower borrowing costs typically spur loan demand and ease funding pressures, benefiting both banks and non-bank financial companies. More affordable credit also boosts purchases of homes and vehicles, lending support to the auto and real estate industries.

The auto index, another rate-sensitive segment, edged up 0.5 percent, whereas the realty index gained 1 percent.

Manoj Dhanotiya, Founder and CEO, MicroMitti, said, "As a PropTech developer rooted in a Tier 2 growth city like Indore, the RBI’s 25 basis point rate cut is a welcome step for firms like ours that operate with complete transparency and only white transactions. Lower borrowing costs directly strengthen buyer confidence in these markets, where affordability and trust drive most decisions."

3) Crude declines: Brent crude slipped 0.17 percent to USD 63.15 a barrel. Softer crude prices tend to ease inflationary pressures and lower input costs for several sectors, providing an additional boost to the market.

4) Firm global cues: Asian markets were mostly firm, with South Korea’s Kospi and Shanghai’s SSE Composite trading in the green. US stocks ended on a flat note overnight.

5) India Vix declines: The India VIX, a measure of market volatility, fell 2.29 percent to 10.57. A lower reading is usually associated with improved risk appetite among investors.