Markets reacted positively today after RBI cut the repo rate by 25 bps to 6.25%
Stock Market Update February 07, 2025 – Benchmark equity indices moved into the green on Friday after the Reserve Bank of India (RBI) reduced the repo rate by 25 basis points. The Monetary Policy Committee (MPC) decision fueled cautious optimism among investors.
Sensex and Nifty Show Modest Gains
Markets opened with volatility but steadied after the announcement. At the time of writing, the BSE Sensex was trading 12.23 points higher at 78,070.39, marking a 0.02% increase. The Nifty50 gained 18.90 points, rising to 23,622.25, reflecting a 0.08% advance.
The marginal uptrend followed the RBI’s move, signaling the central bank’s intent to support economic growth while maintaining inflation stability. Investors factored in the rate cut and its possible implications on liquidity and borrowing costs.
RBI Cuts Repo Rate to 6.25%
The RBI Governor, Sanjay Malhotra, announced the policy rate revision, stating that the decision was based on the inflation trajectory and growth considerations. The repo rate now stands at 6.25%. The policy stance remains neutral, providing room for further adjustments if necessary.
Malhotra highlighted that inflation has moderated and is expected to decline further in 2025-26. The easing of price pressures, particularly in the food sector, contributed to this assessment. The central bank now projects real GDP growth for the upcoming fiscal year at 6.7%.
Sectoral Performance and Market Sentiment
Banking stocks reacted positively to the announcement, with expectations of improved credit demand. Rate-sensitive sectors such as real estate and automobiles also saw increased investor interest. Financial institutions could witness a boost in loan growth as borrowing costs decrease.
Technology stocks remained mixed, with some profit booking seen after recent gains. Export-oriented sectors observed cautious sentiment, as a softer monetary policy could influence currency fluctuations.
Defensive sectors, including FMCG and pharmaceuticals, traded in a narrow range. Investors awaited further clarity on broader economic trends before making decisive moves.
Bond Market and Currency Reactions
Government bond yields edged lower following the rate cut, reflecting expectations of softer monetary conditions. The 10-year bond yield slipped slightly, suggesting increased investor confidence in the interest rate environment.
The Indian rupee remained stable against the US dollar, with minimal fluctuations. Market participants monitored global currency trends and foreign inflows for further cues.
Economic Outlook and Growth Projections
The RBI’s decision aligns with its forecast of economic recovery. Growth is expected to rebound from the low levels of Q2 in 2024-25, although it remains below last year’s expansion.
For 2025-26, GDP growth is projected at 6.7%, with Q1 at 6.7%, Q2 at 7.0%, and Q3 and Q4 at 6.5% each. The risks remain evenly balanced, suggesting a stable outlook barring unforeseen external shocks.
Global Market Trends and Impact on Indian Equities
International markets displayed mixed trends, with investors assessing monetary policy shifts across major economies. The US Federal Reserve’s stance on interest rates remains a key factor influencing global risk appetite.
Asian markets showed moderate movement, reflecting concerns over economic data releases from China. European markets awaited further macroeconomic indicators before setting a clear direction.
Foreign institutional investors (FIIs) continued their cautious approach, balancing risk exposure in emerging markets. Domestic institutional investors (DIIs) provided support, helping absorb volatility in the equity markets.
Investor Strategy and Market Expectations
Market participants will closely monitor corporate earnings, economic data, and global trends to gauge the next phase of market movement. The rate cut adds a positive element, but sustained growth recovery will be critical for further upside.
Short-term fluctuations are expected, with traders adjusting positions based on liquidity conditions. Long-term investors may focus on sectors benefiting from lower interest rates and economic expansion.
The RBI’s neutral stance provides flexibility for future policy actions, ensuring that growth-supportive measures remain in place while keeping inflation under control. The upcoming months will be crucial in determining the effectiveness of the current monetary policy adjustments.
