India’s stock benchmarks closed Friday with gains after the Reserve Bank of India lowered key lending rates by 25 basis points and left room for further cuts, helping bourses nearly erase weekly losses from profit-taking in recent sessions.
The Nifty rose 0.6% to 26,186.45, and the Sensex added 0.5% to 85,712.37 on Friday. They ended flat for the week.
The central bank has now cut rates by a total of 125 basis points since February 2025, the most aggressive easing since 2019.
“Markets are likely to read this as supportive rather than surprising since expectations for a cut had already strengthened after the recent CPI prints softened,” said Sonam Srivastava, founder and fund manager at Wright Research PMS.
Heavyweight financials rose 1%, while other rate-sensitive sectors like auto and real estate gained 0.7% and 0.3%, respectively, on the day.
Lower rates make borrowing cheaper, aiding loan demand and reducing funding costs, which help banks and non-bank lenders. Cheaper loans also help improve the affordability of vehicles and homes.
Eleven of the 16 major sectors fell for the week. The broader small-caps and mid-caps also lost 1.8% and 0.7%, respectively.
The RBI rate cut and a likely U.S. rate reduction next week could fuel a short-term market rebound, supporting a so-called Santa Claus rally, analysts said.
Information technology companies, which derive a substantial share of revenue from the United States, jumped 3.5% this week on rising bets for a Fed rate cut.
Indigo fell 9% for the week as India’s largest airline operator struggled with mass flight cancellations and delays. The regulator on Friday offered some temporary relief to the airline.
(Reporting by Bharath Rajeswaran and Vivek Kumar M in Bengaluru; Editing by Sonia Cheema, Sumana Nandy and Nivedita Bhattacharjee)
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