Rate Cut Hopes Boost Market Sentiment; Sensex, Nifty Gain 1%
The RBI Monetary Policy Committee (MPC) is set to announce its decision on key interest rates today, December 6. Market participants are eagerly watching for signals of a potential shift towards a more dovish stance. Renewed optimism for a rate cut and halting foreign institutional investor (FII) outflows helped Indian equity indices rally sharply in Thursday’s afternoon session.
Both benchmark indices—BSE Sensex and NSE Nifty50—bounced back from morning losses, marking their fifth straight session of gains. The Sensex surged 809.53 points (1%) to close at 81,765.86, while the Nifty50 climbed 240.95 points (0.98%) to settle at 24,708.40.
Positive FII Turnaround Fuels Recovery
“Renewed buying by FIIs over the past few sessions, along with expectations of a dovish monetary policy, has fueled the sharp recovery,” noted V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services. He emphasized that November’s steady services PMI data, despite inflationary pressures, signals resilience in business activity.
Market expert Prashant Tapse of Mehta Equities added that while expectations of monetary easing are high, the RBI remains cautious due to inflation hovering above its 4% target. “A rate cut at this meeting seems unlikely, as the RBI may want to assess more macroeconomic data before taking a decisive step,” he explained.
Expert Opinions Split on Rate Cut
While many experts predict the repo rate will remain unchanged at 6.50%, global brokerage firm Nomura has forecast a 25-basis-point rate cut alongside a 50-basis-point Cash Reserve Ratio (CRR) reduction to boost liquidity. “With GDP growth slowing to 5.4%, well below India’s trend of 6-7%, it’s time for forward-looking monetary easing,” said Aurodeep Nandi, India Economist at Nomura.
Sectoral Gains Lead Market Surge
The Thursday rally was led by IT stocks, with heavyweights like TCS, Infosys, and LTIMindtree gaining over 2%, propelling the Nifty IT index to a fresh 52-week high of 45,027.95 during intra-day trade. Gains were also seen across Oil & Gas, Auto, and Private Bank sectors, which advanced by around 1% each.
In the broader market, the Nifty Midcap100 and Nifty Smallcap100 indices rose by 0.57% and 0.83%, respectively.
FII Inflows Return After Two-Month Selling Spree
A significant shift in FII behavior also played a critical role in lifting market sentiment. FIIs injected over ₹13,000 crore into Indian equities on December 2 and 3, followed by an additional ₹1,797 crore on December 4, marking a reversal after two months of consistent outflows.
Road Ahead for Nifty
According to Ajit Mishra, SVP of Research at Religare Broking, the Nifty50’s breakout above 24,350 has paved the way for a potential move towards 25,100. However, sustained participation across sectors will be crucial to extend this rally. “While IT and Banking stocks are driving gains, selective stock-picking will remain key in this environment,” he advised.
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