Sensex surges 800 pts, Nifty reclaims 25,000: RBI's bumper 50 bps rate cut, other key factors behind market rise

Sensex, Nifty trade higher after RBI MPC outcome.

The benchmark equity indices staged a sharp rebound on Friday, with the Sensex surging over 1,000 points from its intraday low and the Nifty reclaiming the important level of 25,000, after the Reserve Bank of India (RBI) delivered a higher-than-expected 50 basis points repo rate cut and announced liquidity-boosting measures.

At 11:51 am IST, the Sensex was up 760.40 points or 0.93 percent at 82,202.44, and the Nifty was up 251.10 points or 1.01 percent at 25,002.00. About 1955 shares advanced, 1407 shares declined, and 145 shares were unchanged.

Here are the key drivers behind Friday’s market rally:

1. RBI’s 50 bps repo rate cut surprises Street: The central bank cut the repo rate by 50 basis points to 5.5 percent — the lowest level in three years. This was more than what most analysts had pencilled in. The RBI cited the recent moderation in inflation and the need to boost consumption and investment as key reasons for the cut.

With economic growth slipping to a four-year low of 6.5 percent in FY25, the sharper rate cut is expected to ease borrowing costs for individuals and companies. Sectors like housing, automobiles and consumer durables are likely to benefit.

2. CRR cut boosts banking stocks: The RBI also announced a 100 basis point cut in the Cash Reserve Ratio (CRR), to be implemented in four tranches of 25 bps each, bringing it down from 4 percent to 3 percent. The move is expected to release around Rs 2.5 lakh crore into the banking system over the coming months. The announcement triggered strong buying in banking stocks, with traders anticipating higher credit growth and improved net interest margins.

"This is a prudent response to the current environment of controlled inflation and improved economic growth," said Sanjay Daga, CEO and MD of Anex Advisory. "The CRR cut will support liquidity and create a favourable backdrop for sustaining momentum across sectors."

RBI cuts CRR by 100 bps to 3% in phased manner, to inject Rs 2.5 lakh crore liquidity into banking system

3. Firm cues from global markets: Positive cues from Asian markets also aided investor sentiment. South Korea’s Kospi and Japan’s Nikkei 225 traded higher, while Wall Street Futures traded in the green ahead of the U.S. opening.

4. Trump-Xi call eases trade worries: Markets were also comforted by a phone call between U.S. President Donald Trump and Chinese President Xi Jinping. The two leaders discussed ongoing trade issues. While some issues remain unresolved, both sides struck a positive tone, with Trump calling the conversation “very positive” and hinting at progress on the complex issue of rare earth supplies.

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5. Crude oil decline:  Brent crude prices slipped 0.29 percent to $65.15 a barrel. A decline in global oil prices is generally favourable for India, which imports nearly 85 percent of its crude requirements.

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