With Third Straight Rate Cut, RBI Pushes Bank Nifty to Fresh New All-time High
The Bank Nifty index surged by 836 points or 1.5 per cent to touch a record high of 56,597.45 by 11:39 AM.
On June 6, 2025, the Reserve Bank of India (RBI) delivered a surprise 50 basis point cut in the repo rate, reducing it to 5.50 per cent. Additionally, the central bank announced a staggered 100 basis point cut in the Cash Reserve Ratio (CRR), bringing it down to 3 per cent. This policy move, the third consecutive rate cut under the new RBI Governor, triggered a sharp rally in the equity markets. The Bank Nifty index surged by 836 points or 1.5 per cent to touch a record high of 56,597.45 by 11:39 AM.
The central bank also shifted its policy stance to ‘neutral’, signaling flexibility in its approach toward balancing inflation and growth. Consumer Price Index (CPI) inflation has shown a sharp decline, falling from 6.2 per cent in October 2024 to 3.2 per cent in April 2025. Despite the easing bias, GDP growth guidance has been maintained at 6.5 per cent, indicating confidence in underlying economic momentum.
Banking stocks led the rally, with IDFC First Bank gaining 5.49 per cent, Axis Bank rising 3.9 per cent, and Kotak Mahindra Bank, AU Small Finance Bank, and HDFC Bank each advancing over 1 per cent. Improved liquidity and lower cost of funds are expected to benefit not only Large-Cap and Mid-Cap banks but also Small-Cap lenders and Non-Banking Financial Companies (NBFCs). However, some analysts caution that bank margins may come under short-term pressure.
The real estate sector, especially affordable and mid-income housing developers, is set to benefit from reduced interest rates. Lower EMIs are likely to improve affordability for homebuyers, while developers could gain from cheaper financing. The move is also expected to stimulate credit demand across sectors such as auto, MSMEs, and infrastructure, potentially improving their Quarterly Results in upcoming earnings seasons.
Historically, this is not the first time the RBI has adopted a series of consecutive rate cuts. In 2019, it implemented four straight reductions between February and August to counter an economic slowdown. The current easing cycle mirrors that strategy, aimed at reviving demand and supporting growth.
The broader market responded positively to the policy decision. As of 11:42 AM, the Sensex climbed 770 points to 82,219, and the Nifty 50 gained 250 points to breach the 25,000 mark. This market reaction highlights investor optimism toward a growth-supportive monetary environment, especially when inflation remains under control.
Disclaimer: The article is for informational purposes only and not investment advice.