RBI MPC Cuts Repo Rate by 25 Bps: How Did It Impact the Stock Market, Rupee?

In a key move, the Reserve Bank of India Monetary Policy Committee decided to reduce the repo rate by 25 basis points, bringing it down to 6.25% from 6.50%, while maintaining a ‘Neutral’ stance. Following this decision, Indian stock market indices remained range-bound, swinging between gains and losses.

The Monetary Policy Committee meeting, chaired by the new RBI Governor Sanjay Malhotra, marks the first RBI policy under Governor Malhotra and follows the Union Budget 2025-2026 presented on February 1.

Rate Cut Impact on the Indian Stock Market

At 9:30 AM, ahead of the MPC decision announcement, the benchmark BSE Sensex declined by 87.32 points, reaching 77,970.84, while the Nifty50 dipped 32.6 points to 23,570.75. The rupee opened 0.1% higher ahead of the RBI policy announcement.

The market widely anticipated a 25 basis point (bps) cut in the benchmark repo rate, reducing it from 6.50% to 6.25%. Following the decision, the Sensex briefly dipped by 100 points, while the Nifty slipped below 23,600.

However, by 11:45 AM, both indices turned positive, with the Sensex up by 0.17% at 78,197.20 and the Nifty50 up by 0.26% at 23,664.50.

Among the indices, Nifty Consumer Durables and Nifty Realty sectors were among the top performers, both rising by more than 1%.

RBI MPC Rate Cut Impact on the Indian Rupee

At around 10:00 AM, the rupee recovered 16 paise from its all-time low closing level, trading at 87.43 against the US dollar in early Friday trade, ahead of the Reserve Bank of India’s monetary policy announcement.

According to news reports, while a rate cut could ease some pressure on the rupee by improving liquidity and attracting foreign investments, it may also result in increased rupee supply, which could limit the currency’s upside potential.

At noon, the Indian rupee erased some of its early gains and traded at the 87.47 per dollar mark, appreciating by 0.13% against the US dollar.

Conclusion

The RBI’s repo rate cut is a significant policy move aimed at stimulating growth and easing liquidity pressures. While the immediate market reaction was mixed, with the stock indices swinging between gains and losses, the recovery in key sectors like Consumer Durables and Realty indicates a positive sentiment in select segments. The rupee’s recovery from its all-time low highlights market optimism, but the potential increase in rupee supply remains a factor to watch.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.