Sensex, Nifty log best week in six months after RBI cuts CRR by 50 bps: What should investors do now? Experts weigh in | Stock Market News

Stock market today: Domestic equity benchmarks Sensex and Nifty 50 logged their best week since June in the previous session, led mainly by financials after the Reserve Bank of India (RBI) boosted liquidity by cutting the cash reserve ratio (CRR) by 50 basis points (bps) in its December monetary policy committee (MPC) meeting.

Nifty 50 ended the session with a minor loss of 0.12% at 24,677 but posted a sharp weekly gain of 2.27%. Meanwhile, the Sensex closed with a slight drop of 0.07% at 81,709, wrapping up the week with a notable uptick of 2.39%.

The Nifty and Sensex added 2.3% and 2.4%, respectively, this week, their best since early June when the country’s national election results confirmed policy continuity.

On Friday, the Reserve Bank of India (RBI) lowered the CRR by 50 basis points to 4% for the first time in four years, while keeping interest rates unchanged.

“Equity markets got what they wanted from the RBI and have taken the policy outcome in their stride,” said Dhiraj Relli, chief executive of HDFC Securities.

Analysts said that the central bank’s concerns over a recent growth slump as well as elevated inflation could keep markets in consolidation mode, with a positive bias in the coming days.

The BSE Sensex also ended its five-day bull run, closing the session with a slight drop of 0.07% at 81,709, but wrapped up the week with a notable uptick of 2.39%. Notably, this marks the third consecutive week of gains for both indices.

Financials gained 3% in the prior four sessions in anticipation of the cut in the CRR, which is expected to support the margins of lenders. The index closed little changed on the day.

“The CRR reduction will release about 1.16 trillion rupees ($13.71 billion) into the banking system and is a big positive for the banking sector specifically,” Abhishek Goenka, founder and CEO of IFA Global said.

Other domestic rate-sensitive sectors such as realty rose 5.3% this week, while auto gained 2.5%.

The weekly jump in the benchmarks was also supported by IT stocks, which rose this week on the back of comments from the Federal Reserve Chair, signaling strength in the U.S. economy.

Commenting on the market performance, Vinod Nair, Head of Research, Geojit Financial Services said, “Though benchmark indices concluded on a flattish trend, Indian broader indices displayed optimism as the RBI acknowledged the downward growth trend while last-mile inflation persisted.”

“By lowering the CRR and injecting ₹1.16 lakh crore into the financial system, the RBI aims to stimulate economic growth amid increased liquidity. The overall market exhibited a mixed outlook, reflecting a cautious yet resilient stance, with sector rotation and specific stock movements shaping market sentiment,” he added. 

IT firms, which earn a significant share of their revenue from the U.S., gained 3.6% for the week.

The broader, more domestically-focused smallcaps and midcaps rose 0.8% and 0.5% on the day. They ended the week about 4.3% higher.

Commenting on the policy, Dr. Vikas Gupta, CEO and Chief Investment Strategist, OmniScience Capital said,

“The Reserve Bank of India’s decision to maintain the repo rate at 6.5% for the eleventh consecutive meeting, coupled with a neutral policy stance, reflects a prudent approach to balancing inflation management with economic growth support. The 50-basis-point reduction in the Cash Reserve Ratio (CRR) is a strategically timed measure to ease liquidity constraints, injecting over ₹1 trillion into the banking system. This move enhances banks’ capacity to extend credit and invigorates economic activity across sectors.

With inflation projections for FY25 revised to 4.8%, the RBI’s cautious outlook underscores its commitment to maintaining durable price stability while fostering sustainable growth. Notably, the real GDP growth forecast for FY25 has been revised downward from 7.2% to 6.6%, reflecting recent economic challenges. Headline CPI inflation spiked to 6.2% in October from 5.5% in September and sub-4% levels earlier in the fiscal year, driven by a sharp rise in food inflation and a modest uptick in core inflation.

Encouragingly, food inflation is expected to ease in Q4 FY25 as seasonal vegetable price reductions and kharif harvest arrivals bring relief. Meanwhile, the robust performance of private consumption and the services sector continues to underline the Indian economy’s resilience. Temporary headwinds, such as monsoonal disruptions and election-related factors, are anticipated to wane, paving the way for a recovery in the coming quarters.

For investors, this period presents an opportune moment to recalibrate strategies. Sectors with strong earnings visibility, manageable debt levels, and sustainable competitive advantages are likely to drive the next growth cycle. Diversified portfolios focused on emerging growth themes can capitalize on India’s medium- to long-term growth potential, which is underpinned by domestic economic resilience and favorable global trends.

The RBI’s policy adjustments, emphasizing stability and liquidity, position the economy and markets for sustained growth while providing a foundation for strategic, long-term investment opportunities.”

What should be your trading strategy?

Ajit Mishra – SVP, Research, Religare Broking Ltd.

Markets traded within a narrow range and ended the day nearly unchanged despite an eventful session. After a flat opening, the Nifty remained confined to a tight band, as the MPC meeting outcome aligned with market expectations and failed to evoke a significant reaction. Sectoral trends were mixed, with gains in metal and auto stocks, while IT, banking, and energy sectors remained subdued. On the broader front, midcap and smallcap indices continued to exhibit strength, posting gains of 0.44% to 0.85%.

We maintain our bullish outlook and recommend adopting a “buy on dips” strategy, emphasizing selective stock picking. While the strong performance from key sectors such as banking and IT is likely to persist, we anticipate selective contributions from other sectors as well. Additionally, the broader indices, particularly midcap and smallcap segments, are presenting promising opportunities, making selective investments in this space worthwhile.”

Rupak De, Senior Technical Analyst, LKP Securities said, “The Nifty continues to sustain above the breakout from an inverse head-and-shoulders pattern, indicating underlying market strength. In such conditions, adopting a buy-on-dips strategy seems prudent, especially with the potential for an upward move toward 25,500 in the short term.”

However, he said minor pullbacks following a sharp rally are possible, emphasizing the effectiveness of buying on dips to capitalize on this

According to analysts, Looking ahead, the likelihood of a rate cut in the next two MPC meetings has increased considerably. However, the macroeconomic environment has become more volatile and uncertain. For example, in October, a rate cut for December was almost fully priced in, but hawkish comments from Governor Das and a CPI inflation print above 6% tempered those expectations. These discussions resurfaced recently after a disappointing GDP print. These experiences have been humbling, serving as useful learning guidelines for the future. Analysts expect a rate cut in February, but we acknowledge that the events leading up to that decision—such as political developments in the US, the February budget, and the outlook for vegetables over the next two months—will play a critical role in determining the final outcome.

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