The Indian stock markets are experiencing a significant rally today, Friday, December 6, 2025, following the Reserve Bank of India’s (RBI) crucial announcement yesterday. The central bank’s Monetary Policy Committee (MPC) unexpectedly cut the benchmark repo rate by 25 basis points to a new low of 5.25% with immediate effect on December 5, 2025, sending a strong positive signal across financial sectors. This decisive move has fueled a robust Sensex rally and propelled Nifty gains, demonstrating the immediate impact of accommodative monetary policy on current market movements. The market’s enthusiastic response, heavily infused with optimism, reflects a “risk-on” sentiment driven by this latest policy development in December 2025.
Current RBI Policy Dynamics: A Fourth Cut for Growth
The Reserve Bank of India’s latest monetary policy review, concluded on December 5, 2025, saw the MPC unanimously vote to reduce the policy repo rate by 25 basis points, bringing it down to 5.25%. This marks the fourth rate cut by the RBI in 2025, accumulating a total reduction of 125 basis points since February this year. The MPC maintained its ‘neutral’ policy stance, indicating continued flexibility to respond to evolving economic conditions.
This recent decision reflects the central bank’s confidence in sustained disinflation and robust economic momentum, despite a cautious global environment. RBI Governor Sanjay Malhotra highlighted India’s “Goldilocks period” – a rare combination of strong growth and benign inflation – providing ample room for policy easing. Alongside the rate cut, the RBI also announced significant liquidity measures, including Open Market Operations (OMO) to purchase government securities worth ₹1 lakh crore and a three-year USD/INR buy-sell swap of $5 billion, designed to inject approximately ₹1.5 lakh crore into the system this month and ensure efficient transmission of the rate cuts.
Immediate Market Impact: Sensex and Nifty Surge
Indian equity benchmarks, Sensex and Nifty, rallied significantly today, extending gains from yesterday, in an enthusiastic response to the RBI’s rate cut and supportive liquidity measures. The 30-share BSE Sensex advanced 447 points, settling at 85,712.37, while the broader 50-share NSE Nifty climbed 153 points to close at 26,186.45. This strong market performance indicates a renewed investor confidence and a clear “risk-on” sentiment across equities.
The banking and financial services sectors, being highly rate-sensitive, led today’s market rally, witnessing substantial gains. The Nifty PSU Bank index surged by 1.51%, and the Nifty Financial Services index gained 0.98%, with major banking stocks like SBI, Shriram Finance, and Bajaj Finserv emerging as top gainers. Other rate-sensitive sectors including auto and real estate also participated in the broad-based rally, reflecting the positive transmission of monetary policy across various segments.
Economic Implications: Boosting Growth and Liquidity
The RBI’s latest rate cut comes at a time when India’s economic fundamentals remain strong, with GDP growth maintaining momentum while inflation stays within the central bank’s target range. This accommodative monetary policy stance is expected to further stimulate economic activity by reducing borrowing costs for businesses and consumers. The lower repo rate will translate into reduced lending rates across banks, potentially boosting credit demand and investment activity.
The substantial liquidity infusion measures announced alongside the rate cut demonstrate the RBI’s commitment to ensuring adequate money supply in the system. These measures are particularly significant as they address any potential liquidity constraints and support the smooth transmission of policy rate changes to the broader economy. The combination of rate cuts and liquidity support creates a favorable environment for sustained economic growth in the coming quarters.
Investor Outlook: Sectoral Opportunities and Market Sentiment
Current market sentiment reflects strong investor confidence in the RBI’s policy direction and its positive implications for various sectors. Banking stocks are expected to benefit from improved net interest margins as deposit rates adjust slower than lending rates. Real estate and auto sectors are likely to see increased demand due to lower borrowing costs, making these sectors attractive for current investment consideration.
However, investors should remain mindful of global economic uncertainties and potential volatility in international markets. The current rally provides opportunities for selective stock picking, particularly in rate-sensitive sectors that stand to benefit most from the accommodative monetary policy. Market participants are closely watching for further policy signals and economic data that could influence future RBI decisions and market direction.
Conclusion
Today’s market rally following the RBI’s 25 basis points rate cut to 5.25% demonstrates the immediate positive impact of accommodative monetary policy on investor sentiment and market performance. The combination of lower interest rates and substantial liquidity measures creates a supportive environment for continued economic growth and market expansion. This development reinforces India’s position as an attractive investment destination amid global economic uncertainties.
The current policy environment, characterized by the RBI’s proactive approach to supporting growth while maintaining price stability, provides a solid foundation for sustained market performance. Investors should continue monitoring economic indicators and policy developments to capitalize on emerging opportunities in this favorable investment climate. Stay updated with Finvestech.in for latest finance insights and market analysis.
