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Below the Quote on Weekly Note 07 June 2025 by Mr. Ajit Mishra, SVP - Research, Religare Broking Ltd

Markets End Higher Amid RBI Rate Cut Boost; Eyes on Key Data for Next Direction

Markets consolidated for the third consecutive week but managed to end higher by nearly a percent, buoyed by favorable domestic cues. After remaining range-bound for most of the week, benchmark indices surged sharply on Friday and settled near the week’s high, with the Nifty closing at 25,003 and the Sensex at 82,118.99.

Key Market Drivers

Initially, mixed global cues—such as ongoing trade tensions and uncertainty surrounding tariff negotiations—kept investor sentiment subdued. However, supportive domestic developments helped limit the downside. The highlight of the week was the RBI’s policy announcement, which took the market by surprise. The central bank implemented a sharper-than-expected 50 bps repo rate cut and a 100 bps CRR reduction, signaling a strong pro-growth stance. Notably, the policy stance was also shifted from ‘accommodative’ to ‘neutral’—a move that came sooner than expected.

By front-loading its easing measures, the RBI has underscored its commitment to reviving domestic growth amid global uncertainties. While such a bold approach was expected to unfold gradually, this decisive action reinforces confidence in the central bank’s intent to support economic recovery while managing inflation risks.

Sectoral Snapshot

Sectoral performance was broadly positive, with rate-sensitive sectors witnessing strong buying interest. Realty, auto, and banking stocks led the rally, reflecting improved outlooks for credit growth and consumer sentiment. Financials and NBFCs also gained, as lower interest rates are expected to enhance borrowing conditions.

Conversely, IT stocks underperformed due to persistent global uncertainties, particularly in the U.S. and European markets.

In the broader markets, both midcap and smallcap indices outperformed the benchmarks, reflecting a risk-on sentiment among investors, with gains ranging between 2.8% and 4%.

Key Events to Watch

Going forward, market participants will focus on key macroeconomic data for further cues. High-frequency indicators such as CPI inflation will be closely tracked to gauge demand trends and the central bank's next steps. Additionally, the progress of the monsoon and sowing patterns will be monitored due to their implications for rural consumption.

On the global front, developments in trade negotiations and movements in U.S. bond yields will continue to influence investor sentiment.

Technical Outlook

The Nifty has once again approached the upper band of its prevailing consolidation range of 24,500–25,100. A decisive breakout above 25,200 would mark the beginning of a fresh uptrend, with potential to gradually move toward the 25,600–25,800 zone. On the downside, the 24,400–24,600 range is expected to act as a strong support zone during any corrective phase.

Meanwhile, the banking index has finally broken above the key 56,000 mark after trading in a tight range for over a month. We now expect it to move toward the 58,000 level, making this segment crucial for broader market direction. In case of a dip, the 55,350–56,000 range is likely to provide strong support

Strategy Ahead

With the RBI’s rate cut and dovish commentary acting as strong tailwinds, we maintain our positive outlook on the markets and suggest continuing with a “buy on dips” strategy unless the Nifty decisively breaks below 24,600. However, investors should remain selective and focus on fundamentally strong stocks in sectors such as banking, auto, and real estate, which are poised to benefit from lower interest rates. Other sectors may contribute on a rotational basis

Caution is warranted in areas facing margin pressures or global headwinds, such as FMCG and IT. Traders should remain agile and well-informed, especially in light of upcoming macroeconomic data and persistent global uncertainties

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