Benchmark Indices Posted Sharp Gains; The RBI’s aggressive rate and CRR cuts triggered a powerful rally in Indian equities, with the Nifty 50 breaking above 25,000 and the Bank Nifty hitting a record high.
Satish Chandra Aluri,
Lemonn Markets Desk
Mumbai, June 6, 2025: Benchmark indices posted sharp gains on Friday after RBI policy decision. Broader mid and small caps also extended gains on broad based rally in markets.
The RBI’s aggressive rate and CRR cuts triggered a powerful rally in Indian equities, with the Nifty 50 breaking above 25,000 and the Bank Nifty hitting a record high. With inflation falling to 3.2% in April—well below the RBI’s 4% target—the central bank found room to prioritize growth and liquidity support without risking price stability. Rate-sensitive sectors—banks, realty, and autos—led the gains, fuelled by expectations of stronger credit growth and improved liquidity. The RBI surprised markets by cutting the repo rate by 50 basis points to 5.5% (vs. the widely expected 25 bps) and slashed the cash reserve ratio (CRR) by 100 basis points to 3%. The CRR cut will be implemented in four tranches of 25 bps each starting September 2025. The CRR cut alone is expected to inject Rs2.5 lakh crore into the banking system, boosting liquidity and lowering funding costs.
This is the third straight rate cut this year following 25bps cuts each in Feb and April policy meetings. The central bank also shifted its stance from "accommodative" to "neutral," signalling a focus on balancing growth and stability amid moderating inflation (FY26 CPI forecast cut to 3.7%) and global uncertainties.
Bank Nifty hit a record high, buoyed by the Reserve Bank of India’s steeper-than-expected rate cut and reduction in the cash reserve ratio requirement as investors anticipated stronger credit growth and improved profitability for banks. Realty stocks rallied on expectations of lower home loan rates and improved affordability.
Technically, Nifty managed to close above the crucial 25000 level, which might open the door for further upside with next resistance around 25100-25200 zone. On the downside, 24900 acts as immediate support.
