RBI rate decision lifts markets: Sensex settles over 250 pts higher, Nifty ends near 25,700; here are 3 key reasons

Shares rise in trade.

• Sensex and Nifty post best weekly gains in nearly three months.
• RBI keeps interest rates unchanged, boosting market sentiment.
• Nifty FMCG leads sectoral gains; Nifty IT falls for third straight day.

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The benchmark equity indices Sensex and Nifty posted their best weekly gains in nearly three months, aided by optimism over a long-awaited trade agreement between India and the United States, which helped offset losses triggered by the Union Budget and a global selloff in software stocks.

The Reserve Bank of India (RBI) also kept its benchmark interest rate unchanged in its Friday Monetary Policy Committee (MPC) outcome, which further boosted the sentiments.

Helped by fag-end buying, the Sensex advanced 266.47 points or 0.32 percent to settle at 83,580.40. From the day's low of 82,925.35, the benchmark jumped 655.05 points at the end of trade. The Nifty climbed 50.90 points or 0.2 percent to end at 25,693.70 in a volatile session.

On the sectoral front, Nifty FMCG ended the day as the top gainer with gains of 2.27 percent, followed by Nifty Realty. On the other hand, Nifty IT continued to drift lower for the third consecutive day, ending the day 1.47% lower, followed by Nifty Pharma. Nifty IT is down 7 percent in last three sessions of selling in the sector.

"The midcap index rebounded sharply from its 20-day EMA and formed a doji candle with long lower shadow on the daily chart, signalling supportive buying near key moving average support. The Smallcap index faced early session pressure but recovered strongly from the lows, resulting in a dragonfly doji-like candle formation, a sign of intraday rejection of lower levels. The advance-decline ratio was however, skewed in the favour of bears at day’s close. A total of 294 stocks out of the Nifty 500 universe ended in the red," Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities said.

Bank Nifty largely mirrored Nifty’s price action during the session. The index declined to an intraday low of 59,645 before witnessing a strong rebound

Market volatility remained elevated during the week, with the Nifty recording its widest trading range since the announcement of the Lok Sabha election results in June 2024.

"While the Budget led to a temporary dip in markets due to the proposed derivatives tax hike and the Reserve Bank of India largely stayed on script, the U.S.–India trade deal came completely out of the blue," said Aishvarya Dadheech, founder and chief investment officer at Fident Asset Management. "The agreement caught markets off guard in a positive way and helped remove a major overhang," she added.

ITC, Kotak Mahindra Bank and Bharti Airtel were among the top gainers in the Nifty50 pack, rising up to 5 percent, while Tata Consultancy Services and SBI Life Insurance Company were among the key laggards, declining up to 2 percent. Market breadth was negagtive as about 1398 shares advanced, 2192 shares declined, and 165 shares unchanged.

Key reasons behind market rise

1) RBI policy outcome: The Reserve Bank of India kept its benchmark interest rate unchanged on Friday, as expected, as inflation remained at manageable levels and growth concerns eased following increased government spending in the Budget and reduced tariff pressures after a trade deal with the United States.

"RBI’s monetary policy came exactly on expected lines with no change in rates, and stance kept unchanged at neutral," V K Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd, said.

2) Value buying at lower levels: Value buying was seen after the market’s initial decline. Buying interest was seen in select FMCG, oil and gas and private banking stocks after recent corrections.

On Thursday, the Sensex had dropped 503.76 points, or 0.6 percent, to settle at 83,313.93. The Nifty declined 133.20 points, or 0.52 percent, to end at 25,642.80.

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3) Cooling volatility: The India VIX, which measures market volatility and is often referred to as the fear gauge, declined nearly 2 percent to 11.94. A softer volatility index generally indicates reduced near-term uncertainty and improves risk appetite among investors, aiding market stability.

Technical outlook

Sudeep Shah, said "the immediate resistance for Nifty is placed in the 25,750–25,800 zone. A decisive breakout and a strong follow through above this zone could result in Nifty extending its pullback towards 26,000, followed by 26,200 in the short term. On the downside, the zone of 25,550–25,500 zone is likely to act as an immediate support."

(With Inputs from Reuters)

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