Stock Market Update: Sensex & Nifty Rise 1% as RBI Shifts to Neutral Stance

On October 9, Indian stock markets continued their upward trajectory, gaining over half a percent, following a significant announcement from the Reserve Bank of India (RBI). The RBI decided to keep the repo rate steady at 6.5 percent for the tenth consecutive meeting, signaling stability in the monetary policy framework. The critical development was a shift in the RBI’s Monetary Policy Committee (MPC) stance to ‘neutral’ from ‘withdrawal of accommodation,’ indicating a possible rate cut as early as December.

RBI Governor Shaktikanta Das revealed that five out of six MPC members voted in favor of maintaining the current repo rate, a consensus that reflects a cautious yet optimistic outlook on the economy. The strategic shift to a neutral policy stance marks the first change in two years, suggesting that the central bank is potentially preparing to ease interest rates to support economic growth.

Following the announcement, the sense of optimism propelled Indian stock markets even further. The benchmark Sensex witnessed a rise of 608 points, or 0.75 percent, reaching an intra-day peak of 82,243. Similarly, the Nifty index climbed by 204 points, or 0.8 percent, hitting a high of 25,217.5. Broader market indices outperformed their benchmarks, with midcap and smallcap stocks showing robust growth of about 1.5 percent subsequent to the RBI’s decisions.

Sector Performance and Market Sentiment

Market sentiment was predominantly positive across various sectors, with rate-sensitive industries experiencing favorable gains. Notably, the Nifty Realty sector surged by over 2 percent, while both Nifty PSU Bank and Nifty Financial Services saw increases of approximately 1.5 percent. Additionally, the Nifty Bank, Nifty Private Bank, and Nifty Auto sectors observed gains of around 1 percent.

In terms of sector-specific performance, the Nifty Pharma and Nifty Healthcare sectors each rose by 1.5 percent, while Nifty IT climbed by 0.8 percent. Nifty Metal and Nifty Oil and Gas showed modest increases of approximately 0.5 percent each. The only sector displaying a downturn was Nifty FMCG, which decreased by 0.8 percent.

Top Gainers and Losers

Notable performances within the Sensex included top gainers such as SBI, Axis Bank, Tata Motors, Bajaj Finance, and Bharti Airtel. Conversely, major losses were led by Nestle, ITC, HUL, Reliance Industries, and Mahindra & Mahindra (M&M).

Outlook on Growth and Inflation

Looking ahead, the RBI maintains its inflation forecast for the financial year 2024-2025 at 4.5 percent, with quarterly projections outlined as follows: Q2 at 4.1 percent, Q3 at 4.8 percent, and Q4 at 4.2 percent. For the first quarter of FY26, the CPI inflation projection is set at 4.3 percent, with risks viewed as balanced, signaling a stable inflation outlook.

On the growth front, the MPC remains optimistic, projecting the Indian economy to expand by 7.2 percent in FY25. While growth expectations for the second quarter of FY25 have been adjusted downwards, the MPC has increased its forecasts for the latter half of FY25 and the first quarter of FY26. Governor Das reiterated that the Indian economy is expected to maintain a stable growth rate, reflecting resilience and a steady expansion.

This combination of key policy updates from the RBI and positive stock market reactions signifies a growing confidence in India’s economic trajectory, pointing towards a potential for sustained growth momentum and a favorable inflation landscape.