Sensex jumps over 700 points to break 8-day losing streak. What was the good news in RBI policy?

While the headline outcome of the Reserve Bank of India's (RBI) monetary policy committee decision to retain interest rates unchanged was expected, Dalal Street took note of RBI Governor Sanjay Malhotra's comments on stable macro backdrop and pro-market initiatives as Sensex and Nifty broke their 8-day losing spell on Wednesday.

Sensex jumped over 700 points to 80,930, while Nifty also recorded a 0.8% surge to the 24,800 level, led by a rally in banks and other financial stocks. Today's U-turn comes after the Sensex lost over 2,700 points amid in 8 days of consecutive red candles as investors remain worried over delays in trade deal with the US and Trump's measures related to imposition of H-1B visa fee and 100% tariff on branded and patented pharma.

"The MPC delivered exactly a “dovish pause” which the market expected. But despite the policy being in tune with market expectations, the market has given a thumbs up to the policy since the Central bank delivered some unexpected pro-market initiatives like allowing banks to fund acquisitions and also further liberalising loan against shares," Geojit's Dr. V K Vijayakumar said.


In its statement issued after the MPC meeting, RBI revised its GDP growth estimate for the current fiscal year from 6.5% to 6.8%. It also revised down its CPI inflation forecast from 3.1% to 2.6% for the current fiscal year.
Analysts said the GDP and inflation forecasts reflect the central bank’s optimism about the resilient economic outlook.

Malhotra's comments indicate the possibility of one more rate cut, but it will depend on the incoming data and evolving outlook.

Nifty Bank rallied over 1% with Kotak Mahindra Bank and Axis Bank leading the upside with 3% gains. Shares of infrastructure financing stocks such as HUDCO, Ireda, REC, and Power Finance Corporation (PFC) rose over 5% after the RBI announced a slew of measures to make infrastructure financing more efficient.

"To reduce the cost of infrastructure financing by NBFCs, it is proposed to reduce the risk weights applicable to lending by NBFCs to operational, high-quality infrastructure projects," Malhotra said.

The market took note of the RBI's focus on improving credit delivery and ease of doing business, particularly through adjustments to risk weights and regulatory frameworks.

To improve the flow of credit, the RBI raised the ceiling for taking loan against shares from the existing Rs 20 lakh to Rs 1 crore. It has also increased IPO financing limit to Rs 25 lakh, as part of a series of 5 measures announced by RBI to improve the flow of credit in the economy following a 100 basis point rate cut so far in the calendar year 2025.

The RBI has also expanded the lending scope for Indian banks, allowing them to finance mergers and acquisitions by domestic companies. This is seen as a major boost for the banking sector, potentially shifting deal financing away from private credit and into the formal banking system.

"The additional key measures, including easier credit access, regulatory reforms, and steps to internationalize the rupee, reflect a proactive stance towards sustaining momentum. For markets, this outcome is constructive - stable rates and soft inflation support bond yields, while a stronger growth outlook is positive for equities," said Apurva Sheth, Head of Market Perspectives & Research, SAMCO Securities.

The rupee may also see greater stability backed by robust forex reserves and resilient external fundamentals where the announcement for Internationalization of Rupee will act as major tailwinds.