RBI’s bazooka sends Sensex, Nifty soaring. What does it mean for stock market investors

The stock market roared back to life on Friday as RBI Governor Sanjay Malhotra dropped a double-barreled monetary bazooka that stunned Dalal Street into celebration. A surprise 50-basis-point rate cut, paired with a massive Rs 2.5 lakh crore liquidity infusion via a 100-basis-point CRR (cash reserve ratio) cut, sent the Sensex soaring over 800 points and catapulted the Nifty Bank to a fresh record high of 56,644.

The rate cut lowers the repo rate to 5.5%, with the Monetary Policy Committee (MPC) shifting its stance from "accommodative" to "neutral," indicating a limited scope for further rate cuts.

Frontloading this aggressive monetary easing, Malhotra's move comes at a time when investors were desperate for a fresh trigger post Q4 results, and they got one.


“The higher-than-expected 50bp rate cut decision, though positive for growth, is slightly negative from the market perspective for the near-term,” said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. “This will impact the margins of banks and could keep bank stocks under pressure briefly. But the expected credit growth can offset this.”

Also read | Sensex surges 700 points, Nifty above 24,950 after RBI's jumbo 50 bps rate cut

Despite those concerns, investors cheered the liquidity gush. Bajaj Finance and Shriram Finance jumped 4%, leading the NBFC charge, while IDFC First Bank topped the gainers list within Nifty Bank with a 5% surge. PSU banks underperformed but were still in the green.

The CRR cut, to be implemented in four tranches starting September 2025, will unlock Rs 2.5 lakh crore for the banking system. Analysts expect this move to stimulate credit growth, especially when foreign portfolio inflows have been tepid.

“This 50 bps cut was not priced in. The magnitude of this move is significant,” said Divam Sharma, Founder of Green Portfolio PMS. “Borrowing will become cheaper, and companies can now push capex plans. The CRR cut is also a big boost, encouraging banks to lend more freely.”

With inflation projected at a manageable 3.7%, the RBI’s bold moves aim to stimulate domestic consumption, strengthen corporate confidence, and cushion the economy against global trade tensions and geopolitical shocks.

“The cumulative 100 bps rate cut since February underscores the RBI’s urgency to support demand,” said Anil Rego, Founder & Fund Manager at Right Horizons PMS. “But the shift to neutral signals a more cautious, data-driven approach from here.”

That cautious tone was echoed by Abhishek Bisen, Head–Fixed Income at Kotak Mahindra AMC. “The front-loading signals urgency, but further moves will be data-dependent. Global uncertainties like US tariffs and geopolitical tensions remain key risks.”

In the banking space, Naveen Kulkarni, CIO at Axis Securities PMS, expects a pickup in credit growth from H2FY26, supported by improved liquidity and rising demand in unsecured segments.

“We see tailwinds for NIMs and easing stress in unsecured credit. Preferred picks include large private lenders like HDFC Bank, ICICI Bank, and Kotak Bank, as well as mid-sized names like City Union Bank,” Kulkarni said.

Still, the shift to a neutral stance signals that the window for further rate cuts may be narrowing, with the RBI clearly keeping its powder dry in case global risks escalate.

For now, however, Malhotra’s bazooka has given investors exactly what they needed: a reason to believe the bull market still has firepower left.