On Friday, the Indian stock market ended in the red after the Reserve Bank of India (RBI) reduced the repo rate by 25 basis points (bps) to 6.25 percent. This marked the first interest rate reduction in five years, indicating an attempt to stimulate economic growth in the face of global uncertainties.
The BSE Sensex ended the day 197.97 points lower at 77,860.19, and the NSE Nifty dropped 43.40 points to finish at 23,559.95. Out of the 50 Nifty50 stocks, 28 saw gains, while 23 declined. Tata Steel, ITC Hotels, Bharti Airtel, JSW Steel, and Trent were the top gainers in the Nifty index, whereas ITC, SBI, Britannia, Adani Ports, and TCS were the top losers.
VLA Ambala, a SEBI registered research analyst and co-founder of Stock Market Today, commented on the market reaction, stating that the RBI's Monetary Policy Committee lowered the repo rate to 6.25 percent on Friday. This is the first reduction in more than five years, indicating a strategic effort to boost economic growth in the face of a challenging global environment.
He mentioned that this decision is anticipated to positively impact various sectors, particularly real estate, by enhancing market liquidity, enabling developers to speed up current projects and initiate new ones. Additionally, reduced borrowing costs on both new and existing floating-rate home loans are expected to increase housing sales.
At the same time, the RBI maintained India's CPI inflation forecast for FY25 at 4.8 percent and predicted inflation for FY26 at 4.2 percent. Retail inflation dropped to a four-month low of 5.22 percent in December 2024, primarily due to a decrease in food prices. The RBI governor also highlighted that the emphasis on agriculture in the Union Budget for FY26 will be crucial in managing inflation.
Technically, the Nifty created an inverted hammer candlestick pattern at the 50-day EMA during the session, with the RSI at 45. Market analysts predict that in the upcoming session, Nifty might find support between 23,210 and 23,100, with resistance likely around 23,510 and 23,580.
While the rate cut is expected to positively impact interest-sensitive industries such as real estate and automobiles, investors remain cautious as they consider the wider economic effects of the RBI's policy approach.