RBI Rate Cut Lifts Market Sentiment as Sensex and Nifty Recover Weekly Losses

Mumbai – India’s financial markets closed the week on an upbeat note after the Reserve Bank of India announced a 25-basis-point reduction in key lending rates, providing fresh momentum to equities and helping major indices recover from recent profit-booking pressures.

The move signaled the central bank’s confidence in moderating inflation trends and reaffirmed its supportive stance toward economic expansion.

The Nifty closed at 26,186.45 with a gain of 0.6 percent, while the Sensex finished 0.5 percent higher at 85,712.37.

Both benchmarks managed to reverse earlier declines and ended the week nearly flat, reflecting growing optimism among traders following the central bank’s announcement.

The latest cut brings the cumulative rate reduction to 125 basis points since February 2025, marking the most decisive phase of monetary easing in several years.

Market analysts said the decision aligned with expectations shaped by recent softening in retail inflation, allowing investors to take a constructive view of upcoming policy moves.

Financial stocks, among the biggest beneficiaries of lower interest rates, surged by around 1 percent, supporting broader market gains.

Banks and non-bank lenders stand to benefit as cheaper borrowing costs encourage stronger demand for loans across retail and corporate segments.

Other rate-sensitive sectors also advanced, with the auto index rising 0.7 percent and the real estate index adding 0.3 percent during the session.

Lower lending rates typically improve affordability in vehicle and housing markets, encouraging higher consumer spending and aiding sectoral growth.

Although the day’s performance was positive, 11 of 16 major sectors still declined across the week due to earlier profit-taking.

Small-cap and mid-cap indices also registered weekly drops of 1.8 percent and 0.7 percent, reflecting selective investor caution despite the improving macro backdrop.

With the RBI move now in place and expectations of a potential U.S. Federal Reserve rate cut next week gaining strength, analysts believe the markets could witness a short-term rebound.

Some experts have even suggested the possibility of a seasonal “Santa Claus rally” if global and domestic cues remain supportive.

The information technology sector displayed robust performance through the week, rising 3.5 percent as expectations grew for softer U.S. monetary policy.

Since a significant portion of IT revenue comes from North America, any easing in U.S. interest rates is generally seen as positive for the sector’s near-term outlook.

Meanwhile, aviation stocks faced downward pressure, with IndiGo declining 9 percent during the week due to widespread flight cancellations and operational challenges.

However, temporary relief measures offered by India’s aviation regulator are expected to help stabilize the situation and pave the way for recovery in the weeks ahead.

Overall, the RBI rate cut appears to have restored confidence across key segments of the market, reassuring investors about the central bank’s commitment to maintaining financial stability.

With inflation cooling, borrowing conditions improving, and global rate expectations turning more favorable, India’s markets now look well-positioned for a more constructive phase of growth.

As the year draws to a close, market participants will watch both domestic data and international developments closely.

But with sentiment improving and liquidity conditions easing, the outlook for equities remains broadly positive heading into the final stretch of the year.