SENSEX surges 700 pts, NIFTY50 tests 25,000 after RBI's jumbo rate cut; CRR reduced by 100 bps to 3%

The S&P BSE SENSEX jumped as much as 747.89 points, or 0.91%, to 82,189.93 levels. The NSE's benchmark, the NIFTY50 index, also rallied 242.35 points, or 0.97%, to hit a high of 24,993.25 levels.

Last seen, the SENSEX was ruling at 82,143.15, up 701.11 points, or 0.86%, while the NSE's NIFTY50 index was trading at 24,974.55, up 223.65 points, or 0.9%.

The RBI governor announced that the MPC decided to reduce the repo rate by 50 basis points (bps) to 5.5%. Most analysts were batting for a 25 bps rate cut; however, a section of experts had advocated for a 50 bps rate cut.

Besides, the MPC decided to reduce the cash reserve ratio (CRR) to 3% from 4% earlier – a 100 basis point reduction. The cash reserve ratio (CRR) is the percentage of total deposits a bank must have in cash to operate risk-free.

Hence, a reduction in CRR means more liquidity in the system. The RBI governor announced that the reduction will be done in a staggered manner.

This reduction in CRR will release ₹2.5 lakh crore of bank funds, the governor added.

Current Rates

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Rate-sensitive stocks rally

A cut in the repo rate means a reduction in home loan rates, EMIs, etc. Hence, rate-sensitive stocks such as banking and NBFCs, auto, and realty stocks were trading with remarkable gains.

The NIFTY REALTY index was trading at 1,022.30, up nearly 3%, while NIFTY BANK was trading at 56,443.30 levels, up 1.22%.

The NIFTY AUTO index was trading over 1% higher at 23,550.35 levels.

What experts say

Divam Sharma - Founder & Fund Manager at Green Portfolio PMS, said, "although a 25 bps rate cut was already priced in by the markets, a 50 bps cut comes as a surprise. The unanimous decision is along expected lines, but the magnitude of the cut is significant. This move is likely to enhance liquidity in the system, making borrowing cheaper and encouraging companies to pursue capital expenditure. Such investment could benefit the economy in the long term, particularly in an environment where trade wars and geopolitical realignments are becoming more pronounced than pandemic-related disruptions."

The additional 100bps cut in CRR is also a positive step, as it encourages banks to lend more freely. With FPI inflows slowing down, this infusion of liquidity is a timely and welcome move, Sharma added.

Anil Rego, Founder & Fund Manager at Right Horizons PMS, said that a 50 basis point rate cut marks a key turning point in India’s monetary approach, signalling a move from active easing to a more balanced, data-dependent stance amid rising global uncertainties and volatile capital flows.

"The cumulative 100 basis point rate cut since February underscores the RBI’s urgency to support demand, while the shift to a neutral stance signals a more cautious, data-driven approach to balancing growth and inflation risks going forward," Rego added.