Sensex up 1,600 pts, Nifty near 23,300: Why markets surged after RBI policy

Sensex up 1,600 pts, Nifty near 23,300: Why markets surged after RBI policy

Keywords: Sensex, Nifty, RBI policy, rate cut, inflation, GDP growth

Summary:

Indian stock markets surged on Wednesday, with the benchmark Sensex gaining over 1,600 points and the Nifty approaching 23,300, after the Reserve Bank of India (RBI) announced a surprise rate cut.

The RBI cut its repo rate by 75 basis points to 4.40%, signaling its commitment to support economic growth amidst the COVID-19 pandemic. The rate cut was more aggressive than expected by market participants, who had anticipated a smaller reduction.

The rate cut was accompanied by a reduction in the reverse repo rate to 3.35%, aimed at encouraging banks to lend more and support businesses and households. The RBI also indicated that it would continue to maintain an accommodative monetary policy stance to mitigate the impact of the pandemic.

Market analysts attributed the surge in stock prices to the positive sentiment generated by the RBI’s rate cut. The rate cut is seen as a measure to boost economic activity and liquidity, which could benefit corporate earnings.

The rally was broad-based, with gains across sectors. Banking, financial, and automobile stocks led the advance, while IT and healthcare stocks also performed well.

The surge in stock prices also reflects the optimism surrounding the upcoming Union Budget, scheduled for presentation on February 1. Investors are hopeful that the budget will provide further fiscal stimulus to support economic recovery.

However, analysts cautioned that while the RBI’s rate cut is positive for the markets, the economic outlook remains uncertain due to the ongoing COVID-19 pandemic. They advised investors to remain cautious and focus on stock selection rather than betting on speculative rallies.