Where is the market headed?
We had a fantastic day in the markets today, thanks to a surprising and bold move by the Reserve Bank of India. The RBI announced a 50 basis points rate cut, whereas most of the market participants were expecting a more modest 25 basis points reduction. This unexpected move lifted the mood significantly, especially for interest rate-sensitive stocks, which saw a noticeable uptick.
Market Overview
The Nifty chart is clearly bullish. The index has been consolidating in a range since the second week of May, and today it closed right near the top of that range at exactly 25,003. This marks the third time in the last month that the index has tested the 25,000 level. Let’s hope it can finally sustain above this key resistance.
This is indeed a positive development. While central banks in the West are struggling to ease policy due to persistent inflation, India is in a relatively better spot. We have manageable inflation, decent growth, and now a bold move by the RBI with a 50 basis point cut. This signals strongly that India has room to grow. Additionally, a 100 basis point cut in the CRR will inject significant liquidity into the system, bolstering market sentiment further. While part of this move may have been discounted today, the full impact may continue to unfold in the sessions to come.
Nifty Next 50
The Nifty Junior was up 1.26%, hitting a new high for the recent period.
Nifty Mid and Small Cap
Midcaps also rose by nearly 1%, reaching 21,688. Smallcaps were up 0.65%, continuing their upward trend since mid-May.
Bank Nifty
Bank Nifty, arguably the prime beneficiary of this rate cut, surged 1.47%, breaking out of a flag-pole pattern and closing at a new all-time high of 56,578.
GOLD
Gold, on the other hand, was flat at minus 0.01%, closing at ₹9,800 per gram – still very close to its all-time high.
Advance Decline Ratio
Market breadth showed an interesting trend today. At the beginning of the day, the number of advancing stocks crashed, while declines rose, reflecting uncertainty ahead of the RBI announcement. But the moment the rate cut news was released, the advances jumped back up and stayed strong through the day, closing at 299 vs. 200. Clearly, the market was not expecting such a strong surprise – but it welcomed it enthusiastically.
Heat Maps
In the Nifty space, interest rate-sensitive stocks rallied sharply. Bajaj Twins, Axis Bank, Kotak Bank, Shriram Finance, and HDFC Bank all performed well. Autos and steel stocks also joined the rally, along with select pharma names like Dr. Reddy’s and Eternal too.
In the Nifty Next 50, real estate names led the way, with DLF jumping 6.6% and Lodha up 3.7%. Other strong performers included Chola Finance, ICICI General Insurance, REC Limited, Bajaj Holdings, and JSW Energy. Companies like BEL, VBL, BPCL, Info Edge (Naukri), Tata Power, and Adani Green also contributed positively. Some stocks, however, saw profit booking – HAL, Bank of Baroda, Canara Bank, Dabur, Divi’s Labs, United Spirits, and CG Power were among those under pressure.
Sectoral Overview
The sector charts painted a similar picture. Real estate stocks gained a substantial 4.7% for the day, responding positively to the twin boost of the interest rate cut and CRR cut. Private banks were up 1.8%, while financial services and capital markets also posted similar gains. Metals followed closely. The only sectors in the red were defense and media, which saw some profit booking, down about 1.1%.
Sector of the Day
Nifty Realty Index
In our “Sector of the Day” series, Real Estate clearly stood out. Godrej Properties, DLF, Prestige, Oberoi Realty, and Sobha all posted strong gains, both from online and on-ground project exposure. The overall sector rose 4.6% in a single day.
Nifty India Defence Index
In contrast, the defense sector saw some rotation out. Stocks like Zen Technologies fell 5%, Paras Defence lost 4.5%, while GRSE, DCX Systems, and Astra Microwave also gave up recent gains. This indicates that investors may be booking profits in sectors that have performed well and are rotating into newer opportunities, especially those positively impacted by the rate cuts.
It was a strong week and a stronger Friday, with the RBI’s move reinforcing confidence in India’s growth story and creating fresh momentum in the markets.
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