On December 6, following the Reserve Bank of India’s (RBI) decision to maintain the repo rate at 6.5% for the eleventh consecutive time and to adopt a ‘neutral’ policy stance, rate-sensitive sectors experienced mixed trading patterns. The RBI also cut the cash reserve ratio (CRR) by 50 basis points to 4%, which helped bolster market sentiment. Additionally, the central bank raised its inflation forecast for FY25 to 4.8% from the previous estimate of 4.5% and reduced the real GDP growth projection for the fiscal year to 6.6% from 7.2%.
In response to the policy announcement, the benchmark Sensex initially dropped by 260 points to a low of 81,506.19, before bouncing back with a rise of 420 points to reach an intra-day high of 81,925.91. Similarly, Nifty fell by 88 points to a low of 24,620.5 but later climbed over 130 points to hit a high of 24,751.05.
Broader market indices, particularly midcap and smallcap stocks, outperformed the benchmarks, each gaining 0.4%. In the banking and financial sectors, responses were particularly strong following the RBI’s announcement. The Nifty PSU Bank index rose by 1.3%, while Nifty Auto increased by 0.74%. Both Nifty Bank, Nifty Private Bank, and Nifty Financial Services saw gains exceeding 0.4%, with only Nifty Realty dipping slightly by 0.14%.
Among the Nifty Bank stocks, most were in the green, with Bank of Baroda and Canara Bank leading the way with over 2% increases. Other notable gainers included Axis Bank, Punjab National Bank, SBI, and IDFC First Bank, which each rose by more than 0.5%.
Conversely, Federal Bank, AU Small Finance Bank, and HDFC Bank were the only three stocks that recorded losses. In the financial services sector, REC saw a significant 3% jump, while MCX and PFC rose by more than 1.5% each. Companies like LIC Housing Finance, Muthoot Finance, ICICI General Insurance, and ICICI Prudential also posted gains exceeding 0.5%.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, remarked that the monetary policy has effectively addressed current economic needs by prioritizing price stability and alleviating liquidity constraints. The CRR cut is expected to inject ₹1.16 trillion into the financial system, reducing banks’ funding costs and supporting market resilience.
In the auto sector, Motherson led with a notable gain of over 4%. Other companies like Bajaj Auto, Bosch, Exide Industries, and Eicher Motors also reported increases of more than 1%. Stocks such as MRF, M&M, and TVS Motor saw rises of over 0.4%. In contrast, the real estate sector experienced mixed results. Lodha, Brigade Enterprises, and Mahindra Life were top performers, each gaining over 0.5%, while Phoenix, Sobha, and Godrej Properties experienced declines exceeding 1%. Ramani Sastri, Chairman & MD of Sterling Developers, acknowledged that while a rate cut would have favored the real estate sector, the unchanged home loan rates are likely to sustain buyer interest and support the positive sales trend observed recently.
Looking ahead, Anirudh Garg, Partner and Fund Manager at Invasset PMS, noted that the RBI’s neutral stance provides essential stability for investors. He advised fund managers to focus on sectors aligned with strong domestic demand and the long-term growth outlook for India. Despite global uncertainties, Garg emphasized that India’s robust macroeconomic fundamentals and consistent policy framework provide a strong basis for navigating market dynamics.
The CRR reduction is also viewed positively as it enhances liquidity and encourages credit growth, particularly in the infrastructure and housing sectors. Divam Sharma, Founder and Fund Manager at Green Portfolio, remains optimistic about market performance in the near term, despite challenges related to Foreign Portfolio Investor (FPI) inflows.
He highlighted the need for measures to boost FPI inflows, especially from Non-Resident Indians (NRIs), to enhance market momentum. Sharma anticipates that as the economic situation in the U.S. stabilizes, FPI inflows into Indian markets may increase, providing further support for growth.
