The Indian stock market ended with strong gains on Friday after the Reserve Bank of India made bold policy decisions, including a repo rate cut of 50 basis points and a reduction in the cash reserve ratio CRR by 1 percent. This move was welcomed by investors and led to an almost 1 percent rally in benchmark indices.

The S&P BSE Sensex surged 746.95 points to settle at 82,188.99, while the NSE Nifty50 jumped 252.15 points, closing at 25,003.05, crossing the psychological level of 25000 for the first time in weeks.

RBI shocks with aggressive monetary easing

In a move that exceeded market expectations, the Monetary Policy Committee of RBI slashed the repo rate by 50 basis points. This was interpreted as a strong signal to support growth amidst a globally uncertain macroeconomic environment.

According to Dr Manoranjan Sharma, Chief Economist at Infomerics Valuation and Ratings Ltd, the rate cut is bold and growth-focused. He also highlighted that the CRR reduction from 4 percent to 3 percent would be implemented in four equal tranches of 25 basis points each, beginning from:

• September 6

• October 4

• November 1

• November 29

This staggered CRR reduction is expected to inject durable liquidity into the banking system, helping banks extend more credit and improve transmission of rate cuts.

Strong market reaction and sector performance

According to Vinod Nair, Head of Research at Geojit Financial Services, the central bank’s actions offer a strong push to liquidity and economic momentum. Investors viewed the moves as pro-growth and supportive for long-term equity performance.

The rally was led by rate-sensitive sectors, including:

• Nifty Realty up 4.68 percent

• Nifty Financial Services up 2.09 percent

• Nifty Private Bank up 1.79 percent

• Nifty Auto up 1.52 percent

• Nifty Consumer Durables up 1.32 percent

These gains reflect growing optimism in sectors that benefit from lower borrowing costs and rising consumer demand.

Top performing stocks on Sensex

Among the best performing stocks on the Sensex:

• Bajaj Finance surged 4.93 percent

• Axis Bank gained 3.15 percent

• Maruti Suzuki India climbed 2.64 percent

• IndusInd Bank jumped 2.50 percent

• Bajaj Finserv advanced 2.36 percent

These companies are seen as key beneficiaries of lower interest rates and increased credit growth.

Midcap and smallcap participation

The broader markets also rallied, showing widespread investor participation:

• Nifty Midcap 100 index gained 1.21 percent

• Nifty Smallcap 100 index rose 0.81 percent

This indicates that the rally was not limited to large caps, but reflected overall market strength.

The India VIX, a measure of market volatility, fell 3 percent, showing reduced investor fear and stronger confidence.

Sectoral snapshot

Almost all sectoral indices ended in green. Highlights include:

• Nifty Metal up 1.50 percent

• Nifty Oil and Gas up 0.57 percent

• Nifty PSU Bank up 0.58 percent

• Nifty Healthcare up 0.52 percent

• Nifty IT up 0.50 percent

• Nifty FMCG up 0.31 percent

• Nifty Pharma up 0.19 percent

The only losing sector was:

• Nifty Media down 1.14 percent

Gainers versus laggards

Despite the broad rally, a few stocks showed minimal losses or muted gains:

• Bharti Airtel was the only notable loser, falling 0.39 percent

• Sun Pharmaceutical Industries gained marginally by 0.20 percent

This performance shows that market sentiment was overwhelmingly positive, with limited downside pressure.

Investor outlook and strategy ahead

This policy shift from RBI clearly indicates that growth and liquidity support are top priorities. With borrowing rates expected to fall and liquidity improving in the financial system, sectors like banking, real estate, consumer finance, and auto are expected to perform well.

However, investors should remain watchful of:

• Global inflation data

• US Federal Reserve decisions

• Crude oil price volatility

• Geopolitical risks

While the short-term outlook is bullish, it is important to stay selective and avoid overexposure in highly volatile stocks.

Conclusion

The strong rally in Sensex and Nifty was powered by a monetary policy surprise from the RBI. With both repo rate and CRR lowered, the central bank has signalled an aggressive approach to revive economic growth and support market liquidity.

The reaction from the markets has been overwhelmingly positive, with broad-based sectoral gains, midcap and smallcap participation, and a decline in volatility index.

As long as global risks are managed, this policy decision is likely to usher in a favourable environment for Indian equities in the upcoming quarters.

The Upcoming IPOs in this week and coming weeks are Jainik Power Cables, Sacheerome Limited, Victory Electric Vehicles International, Wagons Learning.

The Current active IPO are Ganga Bath Fittings.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.