Indian equity markets cheered the Reserve Bank of India’s (RBI) policy decision on Friday, with benchmark indices rebounding sharply from their intraday lows, led by strong buying in rate-sensitive stocks. The BSE Sensex recovered 581 points from the day’s low to hit 85,659, while the NSE Nifty bounced 0.66% to touch 26,157.

At the time of reporting, the 30-share Sensex was up 321 points, or 0.38%, at 85,586, and the Nifty50 had climbed 108 points, or 0.41%, to 26,141. The broader market, however, saw a mixed trend—while the Nifty Midcap 100 gained 0.15%, the Nifty Smallcap 100 slipped nearly 0.7%.

Among Sensex constituents, Bajaj Finserv led the gainers, rising 2.43%, followed by Bajaj Finance at 2.33%. IT stocks were also buoyant, with HCL Tech up 1.93% and Infosys gaining 1.89%, while SBI added 1.43%. Other heavyweights such as Maruti, Tech Mahindra, TCS, M&M, and L&T also ended with moderate gains.

On the downside, Hindustan Unilever emerged as the biggest laggard, falling 3.58%. Tata Motors Passenger Vehicle, Sun Pharma, Axis Bank, and Trent posted mild declines between 0.44% and 0.60%. Losses in heavyweights including Reliance Industries, Bharti Airtel, Adani Ports and Asian Paints capped the overall upside.

Across sectors, rate-sensitive indices such as realty, banking, auto, and financial services were among the top gainers, rising 0.4% to 0.9%. In contrast, FMCG, media, healthcare, consumer durables, and oil & gas declined between 0.1% and 0.6%.

The sentiment boost came after the RBI, led by Governor Sanjay Malhotra, cut the repo rate by 25 basis points to 5.25% and maintained a neutral stance. The central bank also announced a major liquidity infusion to ease financial conditions and help stabilise the rupee.

To inject durable liquidity, the RBI will conduct open market purchases (OMOs) of government securities worth ₹1 lakh crore in December. Additionally, it will carry out a three-year dollar–rupee sell/buy FX swap of $5 billion, a move aimed at bolstering rupee liquidity and calming currency market volatility.

Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank, said, “The repo rate cut along with liquidity easing measures announced by the RBI is exactly in line with our expectations. With RBI continuing to leave room open for further easing, we do not rule out another 25 bps cut, with the likely terminal rate at 5%, followed by a prolonged pause.”

Murthy Nagarajan, Head – Fixed Income, Tata Asset Management, said the RBI has detailed its OMO schedule, with ₹50,000 crore purchases on December 11 and another ₹50,000 crore on December 18, alongside an FX swap of $5 billion on December 16.

“A total of ₹1,45,000 crore of liquidity is expected to be injected over the next 15 days,” he said. “This is only for December; further measures are likely in Q4. This should push 10-year yields down to 6.25–6.30% from the current 6.45–6.50%.”

Apurva Sheth, Head of Market Perspectives & Research, SAMCO Securities, said rate cuts may exert further pressure on the rupee until foreign flows return meaningfully. “Currency and growth are the two major factors the RBI now needs to balance after benign inflation,” he noted.

Despite the rate cut, Naveen Kulkarni, CIO, Axis Securities PMS, said he believes the earnings-downgrade cycle is over. “We expect earnings growth to improve from here on,” he added.

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