Market Cheers RBI’s Mega Decisions, Nifty Closes Above 25,000
The Indian stock market witnessed a significant surge on Friday, with the benchmark indices Sensex and Nifty rising sharply in response to the Reserve Bank of India’s (RBI) decision to cut the repo rate and cash reserve ratio (CRR). The RBI’s monetary policy review brought much-needed relief to the market, leading to a strong rally in equities.
The RBI’s decision to reduce the repo rate by 50 basis points to 5.50% and CRR by 100 basis points (in four tranches) was seen as a pro-growth move, which boosted market sentiment. The reduction in repo rate is expected to increase liquidity in the system, making it cheaper for banks to borrow and lend, thereby increasing credit flow to the economy. The cut in CRR, on the other hand, is expected to release Rs 1.4 lakh crore of funds into the system, which can be used for lending.
The Sensex, which had been trading flat in the morning, surged 746.95 points or 0.92% to close at 82,188.99. The Nifty, which had been hovering around the 24,500 mark, rose 252.15 points or 1.02% to close at 25,003.05, surpassing the 25,000 mark for the first time in history.
The rally was led by banking and financial stocks, which gained significantly in response to the RBI’s decision. The Nifty Bank index rose 2.35% to close at 31,144.45, while the Nifty Financial Services index gained 2.13% to close at 13,455.95.
The RBI’s decision was also seen as a positive for the overall economy, which has been facing challenges due to the ongoing pandemic and global economic uncertainty. The reduction in repo rate and CRR is expected to increase economic activity, boost growth, and create jobs.
The market reaction to the RBI’s decision was also influenced by the recent global trends. The US Federal Reserve had recently cut interest rates, and the European Central Bank had also announced a stimulus package to boost economic growth. The RBI’s decision was seen as a response to these global trends and a move to keep India’s economy aligned with the global growth trajectory.
The RBI’s decision to cut the repo rate and CRR was also seen as a positive for the rupee, which had been under pressure due to dollar inflows and weak economic data. The rupee strengthened by 0.45% against the dollar on Friday, closing at 74.54 per dollar.
The market reaction to the RBI’s decision was also influenced by the upcoming budget, which is expected to be presented on February 1. The budget is expected to provide a boost to the economy, and the RBI’s decision is seen as a positive precursor to the budget.
In conclusion, the RBI’s decision to cut the repo rate and CRR was seen as a pro-growth move, which boosted market sentiment and led to a strong rally in equities. The reduction in repo rate and CRR is expected to increase liquidity in the system, make it cheaper for banks to borrow and lend, and boost economic activity. The market reaction was also influenced by the recent global trends and the upcoming budget.
