Indian share market moved in a narrow range on Friday, swinging between gains and losses, even after the Reserve Bank of India (RBI) cut interest rate by 25 basis points (bps) for the first time in six years. The rate cut was discounted by the market as it was widely in line with Street expectations, a logical progression following the shift to a neutral policy stance in October 2024 and the Cash Reserve Ratio (CRR) reduction in December 2024. Additionally, global factors such as the ongoing trade war amid U.S. President Donald Trump's tariff plans added an element of uncertainty in the equity markets.

Following the RBI policy announcement, the equity benchmark, BSE Sensex and NSE Nifty, swung back into the green zone and rose up to 0.3%. The 30-share Sensex surged 233 points to 78,291, and the Nifty50 climbed 84 points to reach the 23,687 mark. The broader market witnessed mixed trend, with BSE midcap gaining up to 0.6%, while the BSE smallcap was down by 0.1%.

Reacting to the rate cut, rate sensitive stocks such as banking, auto, realty stocks witnessed mixed reactions as lower interest rates are expected to boost consumption.

Early today, the Sensex opened marginally higher by 61 points at 78,119 and the Nifty belled the day at 23,649.50, up 46 points. The market opened on a flat note as caution prevailed in the market ahead of the RBI policy outcome. Investors also remained slide lined ahead of the key U.S. job data slated to be released tonight, which will help in determining the path for interest rate cycles for the federal Reserve.

RBI finally delivers rate cut

In line with Street expectations, the central bank delivered its first rate cut in six years by lowering repo rate to 6.25% from 6.5%. The apex bank had kept the interest rate unchanged for almost two years before announcing a cut today. The MPC unanimously voted to continue with a neutral stance to support growth, while remaining focussed on aligning inflation with the target, said RBI Governor Sanjay Malhotra. The RBI has projected real GDP growth for 2025-26 at 6.7%, with Q1 at 6.7%; Q2 at 7.0%; and Q3 and Q4 at 6.5% each.

Analysts reaction to RBI policy

The market has not reacted much to the rate cuts as it was widely anticipated that the RBI would deliver a rate cut, said Apurva Sheth, Head of Market Perspectives & Research, SAMCO Securities. “We believe that this rate cut is a welcome step in the right direction by the RBI. However, the quantum and timing of further rate cuts will depend a lot on how the Fed moves forward as even they are in a wait and watch mode because of the President Trump’s policies and how it might affect global inflation.”

Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank and Anu Aggarwal, Head – Corporate Banking, Kotak Mahindra Bank, opines that the MPC’s decision to cut repo rate by 25bp and maintain neutral stance is completely in line with the expectations. “The softening growth and inflation outlook has provided room to monetary easing. Further from here, we expect the RBI will need to monitor liquidity conditions more closely to ensure liquidity stance remains in sync with the policy stance,” she added.

Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS, expects another rate cut of 25bps in the upcoming meetings. "The RBI reversed the interest rate cycle by announcing a rate cut of 25bps, after holding rates steady for a couple of years. This was largely anticipated post the liquidity boosting measures announced in late Jan'25.”

Echoing the same, Indranil Pan, Chief Economist, YES BANK, said that the RBI will carry through with further rate cuts in April and thereafter. However, this rate cutting cycle may be shallow. “Given that there is now expectation for the economy growth to slump, we think that the RBI could be happy at keeping the real interest rate at 150 bps than at 100 bps. With inflation forecast for FY26 at 4.2%, a 150-bps real rate means that the repo rate can go down to 5.75%. Thus, my base case is for the terminal repo rate at 5.75% (another 50 bps cut from here on) and in the event that the RBI would want to make an insurance cut, the terminal rate can at best be at 5.50% (75 bps from here on).”

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)