Sensex, Nifty edge higher after RBI’s status quo; financial stocks gain on foreign inflow measures

Indian equity benchmarks edged higher on Friday after the Reserve Bank of India’s (RBI) monetary policy committee (MPC) kept policy rates unchanged and announced measures aimed at attracting foreign capital into domestic financial markets.

At 11:10 AM, the BSE Sensex was trading 70.53 points, or 0.29%, higher at 24,562.98, after touching an intraday high of 24,598.79. The Nifty 50 gained 70.65 points, or 0.30%, to 23,487.20.

Broader markets also remained firm, with the Nifty Midcap 100 and Nifty Smallcap 100 both rising 0.6% each.

The market rebounded after the MPC unanimously decided to keep the policy repo rate unchanged at 5.25% and maintain a neutral policy stance, citing heightened global uncertainties arising from the ongoing West Asia conflict, rising energy prices, and supply chain disruptions.

Measures to boost foreign inflows lift sentiment

Investor sentiment was boosted after the government exempted capital gains tax on foreign investments in government securities, while the RBI announced a series of measures to encourage overseas capital inflows.

In his policy statement, RBI Governor Sanjay Malhotra said the investment limit for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) in equities would be increased, while the universe of government securities eligible under the Fully Accessible Route (FAR) would also be expanded.

Financial stocks led gains on expectations that the measures would improve liquidity and attract foreign investment. Bajaj Finance surged 3.7%, while Shriram Finance gained 2.5%. Jio Financial Services, Axis Bank , State Bank of India , and ICICI Bank also traded in the green.

Among the top gainers on the Nifty were Bajaj Finance, Shriram Finance, Adani Enterprises, Adani Ports SEZ, and Hindustan Aeronautics .

Sectorally, rate-sensitive pockets outperformed. The Nifty PSU Bank index rose 1.7%, while the Nifty Financial Services index gained 1.2%. The Nifty Realty index advanced 1.9%, reflecting optimism that stable interest rates would support credit demand and investment activity.

However, gains were capped by weakness in technology and metal stocks. Wipro declined 3.7%, while Tata Steel, Coal India, Hindalco Industries, and Trent fell between 1.7% and 1.9%. The Nifty IT index slipped 0.4%, and the Nifty Metal index declined 0.7%.

Meanwhile, market volatility eased, with the India VIX falling 1.2% to 15.69, indicating reduced near-term risk perception among investors.

Analysts see RBI policy as a cautious balancing act

Analysts said the RBI’s decision to keep the repo rate unchanged at 5.25% reflects a carefully calibrated “wait-and-watch” approach, as policymakers navigate a complex mix of resilient domestic growth, rising global uncertainties, and emerging inflation risks.

Sumit Singhania, Head of Research at Bajaj Broking, said the RBI has adopted a pragmatic stance, balancing strong domestic demand and services exports against external headwinds such as geopolitical conflicts, supply chain disruptions, and weather-related risks. He noted that the downgrade in GDP growth to 6.6% and upward revision in inflation to 5.1% highlight evolving macroeconomic stress, with price pressures likely to intensify from Q4 as energy costs feed into retail inflation.

On the banking sector, Naveen Kulkarni, CIO at Axis Securities PMS, said margins are expected to remain under pressure due to sticky cost of funds and intense competition for deposits. He added that larger private banks are better placed in a potential rate hike scenario due to higher exposure to EBLR-linked lending, while maintaining a selective investment approach across banks and NBFCs.

Garima Kapoor of Elara Capital said that while the policy decision was broadly expected, the RBI’s additional measures to support the rupee stood out. However, she cautioned that persistent inflation pressures could reopen the case for rate hikes in the second half of FY27.

Anindya Banerjee of Kotak Securities said the policy effectively blends monetary stance with balance sheet measures to manage capital flows, noting that recent steps could support bond inflows and help stabilise the rupee in the near term.

Abhinav Tiwari of Bonanza highlighted risks from weak monsoon forecasts, El Niño conditions, and global disruptions, though he expects supply shocks to ease from Q4, supported by strong government capex and resilient services exports.

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