Indian indices Sensex and Nifty rose on June 6 after the RBI cut the repo rate by 50 basis points. The shift to a ‘Neutral’ stance improved investor sentiment, with key sectors like Realty and Auto seeing significant gains, while defensive sectors lagged.

RBI policy impact on Indian stock market: Indian benchmark indices Sensex and Nifty ended higher on June 6, reversing early losses after the Reserve Bank of India (RBI) surprised markets with a larger-than-expected 50 basis points repo rate cut in its June monetary policy review, a move that sparked optimism across sectors and lifted investor sentiment.

The RBI-led Monetary Policy Committee (MPC), under Governor Sanjay Malhotra, also shifted the policy stance from ‘Accommodative’ to ‘Neutral’.

The benchmark Sensex climbed over 800 points to its intra-day high of 82,299.89, while the Nifty added over 250 points to its day’s high of 25,029.50. The positive momentum extended to the broader markets as well, with the Nifty Midcap index rising 0.8 per cent and the Nifty Smallcap index advancing 0.6 per cent. Meanwhile, the India VIX declined another 2 per cent, indicating reduced volatility expectations.

In a further signal of confidence, the central bank revised its CPI inflation forecast for FY26 downward to 3.70 per cent from 4 per cent, while retaining the GDP growth projection at 6.5 per cent.

Realty, Auto, and Financial Stocks Lead Rally RBI policy impact:

The dovish policy tone triggered strong buying in rate-sensitive sectors. The Nifty Realty index surged 4.3 per cent, becoming the top-performing sector, as investors cheered the supportive outlook for housing demand and affordability. The Nifty Financial Services index rose by almost 2 per cent, while Nifty Bank added 1.5 per cent and Nifty Auto rose 1 per cent.

Other gainers included the Nifty Metal index, up over 1 per cent, and the Nifty Oil and Gas index, which added 0.4 per cent. However, defensive sectors like Nifty IT and Nifty Pharma closed in the red as investors rotated into cyclical and growth-oriented plays.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, offered a nuanced take on the development. “While the 50 basis point rate cut is growth-positive, it could be marginally negative for the markets in the near-term. This move appears to front-load the rate easing cycle, and the shift in stance to ‘Neutral’ signals that further cuts may not come soon unless conditions change dramatically,” he said.

He added that bank margins could face short-term pressure due to the aggressive cut, though any weakness may be offset by the pick-up in credit demand and improved loan growth over time.

Rate Cut Aimed at Supporting Growth, Credit Revival

According to Sonam Srivastava, Founder and Fund Manager at Wright Research PMS, the unexpected 50 basis point rate cut highlights the RBI’s growing focus on stimulating economic growth amidst moderating inflation and global monetary easing. “With real rates still elevated and domestic demand showing uneven trends, this move is intended to unlock credit growth, revive private sector investment, and ease repayment burdens for borrowers,” she said.

Srivastava also noted that key sectors such as housing, auto, banking, and infrastructure are likely to benefit as transmission picks up pace. She added, “The move improves the medium-term outlook for consumption and capital expenditure. Bond markets, especially in the long-duration segment, are expected to rally, setting the stage for a more accommodative environment going into the second half of the year.”

The RBI’s bold and unexpected rate cut delivered a clear message of pro-growth intent, reinforcing confidence in India’s monetary policy trajectory. While the move triggered gains across equities, especially in interest rate-sensitive sectors, analysts remain watchful of the evolving credit environment and transmission trends. With inflation expectations cooling and global easing cycles underway, the RBI’s pivot could support a broad-based recovery, even as markets weigh the near-term implications for banking margins and liquidity.