A Timely Boost for the Bulls

The repo rate cut and CRR reduction, intended to boost liquidity, lifted the markets, with the real estate sector emerging as the standout performer

Over the past fortnight, Indian benchmark indices traded within a tight range, with investors awaiting a decisive trigger to steer the market in either direction. The anticipation finally gave way in the last trading session, as the Reserve Bank of India’s Monetary Policy Committee (MPC) delivered a widely expected yet impactful announcement. The MPC cut the repo rate by 50 basis points, bringing it down to 5.5 per cent. Interestingly, the policy stance was revised from ‘accommodative’ to ‘neutral’, indicating a shift in the RBI’s approach. While markets welcomed the move, the initial reaction was measured.

However, investor sentiment received a significant boost following the MPC’s decision to reduce the Cash Reserve Ratio (CRR) by 100 basis points from 4 per cent to 3 per cent—to be implemented in four tranches of 25 basis points each. This CRR cut is expected to infuse substantial liquidity into the banking system, providing a timely stimulus to support credit growth and market momentum. RBI maintained its FY26 GDP projection at 6.5 per cent, indicating confidence in the current economic trajectory.

A sharp uptick in the last trading session propelled benchmarks into green territory for the fortnight, with both the BSE Sensex and Nifty 50 posting gains of around 1 per cent. In contrast, broader markets outperformed significantly. The BSE Small-Cap Index climbed 3.72 per cent, and the BSE Mid-Cap Index surged 2.75 per cent, reflecting renewed investor interest in mid-cap and small-cap stocks. On the sectoral front, movements remained largely muted, with the notable exception of the real estate sector, which staged a sharp recovery and led the gains.

The BSE Realty Index, which tracks the performance of leading real estate companies, soared over 11 per cent during the fortnight. Notably, it spiked nearly 5 per cent in a single trading session following the RBI’s rate cut announcement. The sharp rally was driven by improved sentiment in the interest rate-sensitive real estate sector, as lower borrowing costs are expected to boost housing demand and support sectoral growth. Sectoral indices such as FMCG, oil & gas, and information technology witnessed marginal declines during the fortnight.

Foreign Institutional Investors (FIIs) turned net sellers, showing reduced buying activity compared to the previous period. In contrast, Domestic Institutional Investors (DIIs) provided strong support to the markets, infusing a substantial ₹59,000 crore, which helped offset the FII outflows and maintain market stability. Although benchmark indices have staged a notable recovery from recent lows, they still remain around 4 per cent below their previous record highs. The key question now is: can they reclaim and surpass those levels in the near term? If so, what potential triggers could drive the next leg of the rally? Stay tuned as we continue to track the developments closely.