Dalal Street Rallies Ahead of RBI Policy: Sensex, Nifty Gain for Second Day

Indian equity benchmarks extended their gains for a second consecutive session on Thursday, June 5, 2025, as investor sentiment was lifted by hopes of an interest rate cut by the Reserve Bank of India (RBI) in its upcoming monetary policy meeting, coupled with renewed buying interest from Foreign Institutional Investors (FIIs).

Market Performance: A Day of Optimism

The domestic stock market opened on a positive note this morning. The 30-share BSE Sensex started the day at 81,196.08, up 197.83 points from its previous close, while the NSE Nifty 50 index opened at 24,691.20, gaining 71 points.

Throughout the trading session, the bulls maintained their grip. The markets gained further momentum as the day progressed, driven by broad-based buying across several key sectors. The Nifty 50 touched an intraday high of 24,899. Mid-day reports showed the Sensex trading significantly higher, with one source indicating it was up by 775.73 points (0.96%) at 81,775.06, and the Nifty up by 229.80 points (0.93%) at 24,850.00 around that time.

By the closing bell, the BSE Sensex settled at 81,442.04, marking a gain of 443.79 points or 0.55%. Similarly, the NSE Nifty 50 closed at 24,750.90, up by 130.70 points or 0.53%. The overall market breadth was positive, with midcap and smallcap indices outperforming their large-cap counterparts, indicating wider market participation.

Key Catalysts Driving the Rally

Several factors contributed to today’s positive market performance:

1. RBI Monetary Policy Expectations: The primary driver for the market’s optimism is the anticipation surrounding the RBI’s Monetary Policy Committee (MPC) meeting, with the outcome scheduled to be announced on Friday, June 6, 2025. Market participants are widely expecting a rate cut, potentially the third consecutive one, given that inflation has remained below the RBI’s 4% target and there are early signs of slowing GDP growth. Pranay Aggarwal, Director and CEO of Stoxkart, commented, “With inflation well below the RBI’s 4% target and GDP growth showing early signs of slowing, I believe the market is rightly anticipating a rate cut in the upcoming MPC meeting. While a 25 bps cut seems most likely, there’s a strong case for a deeper 50 bps cut to further support credit growth and economic momentum.” A rate cut is generally seen as positive for rate-sensitive sectors like banking, real estate, and automobiles as it lowers borrowing costs and can stimulate demand.

2. Return of FII Buying: Foreign Institutional Investors (FIIs), who had been net sellers in the preceding three sessions, turned net buyers on Wednesday, June 4. According to exchange data, FIIs purchased equities worth ₹1,076.18 crore. This renewed interest from foreign investors provided a significant boost to market sentiment. Domestic Institutional Investors (DIIs) also continued their buying streak.

3. Positive Global Cues (Mixed but Supportive): While Asian markets showed a mixed trend today, a largely firm sentiment in some regional markets contributed to the positive mood in domestic equities. South Korea’s Kospi and Hong Kong’s Hang Seng traded positively, though Japan’s Nikkei 225 quoted lower. US markets had ended on a mixed note on Wednesday.

4. Sectoral Strength and Stock-Specific Action: The rally was broad-based, with several sectors contributing to the gains. The Nifty Pharma and Nifty Realty indices advanced over 1% each, followed by the Nifty IT index which also saw healthy buying interest. Key heavyweight stocks also played a role. Reliance Industries, ICICI Bank, Power Grid, and Eternal Healthcare were among the top gainers in the benchmark indices. Eternal Healthcare was a notable performer, topping the gainers’ chart with a rally of 4.50% to end at ₹256.55. Power Grid gained 1.96%, ICICI Bank advanced 1.65%, and Reliance Industries rose 1.37%. On the other hand, some stocks faced selling pressure. IndusInd Bank was the top laggard, falling 1.41%, followed by Axis Bank which slipped 1.06%. Bajaj Finserv and Bajaj Finance also declined.

Expert Opinions and Market Outlook

Market experts maintain a cautiously optimistic outlook. Vaishali Parekh, Vice President of Technical Research at Prabhudas Lilladher, noted that the Nifty 50 index has sustained above the important support zone near 24,500. She believes the index faces a minor hurdle at 24,800 and crucial resistance at 25,000. A decisive breach above 25,000 could trigger a fresh upward move. For Bank Nifty, she highlighted that a decisive breach above 55,800 is needed for a breakout.

Chandan Taparia, Analyst – Derivatives at Motilal Oswal Financial Services, suggested that the Nifty needs to cross and hold above the 24,700 zone for a potential move towards 24,800 and then 25,000. He indicated a broader trading range for the Nifty between 24,200 and 25,100.

The India VIX, a measure of market volatility, slipped, indicating easing nervousness among traders.

What to Watch Next

For retail investors and traders, the immediate focus will be on a few key developments:

• RBI Monetary Policy Announcement (Friday, June 6, 2025): This is the most significant near-term event. The actual rate decision and the RBI Governor’s commentary on inflation, growth, and future policy stance will be crucial in setting the market’s direction.
• Global Market Trends: Continued monitoring of global indices, commodity prices (especially crude oil), and currency movements (USD/INR) will be important. Brent crude was seen trading around $62-$64 per barrel.
• FII/DII Activity: Tracking the flow of institutional money will provide insights into market sentiment.
• Technical Levels: For the Nifty 50, key support levels are around 24,500, with resistance at 24,800 and 25,000. A sustained move above these levels could indicate further upside.

Investors are advised to remain watchful and align their strategies based on the evolving market conditions and the outcome of the RBI policy.

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This article is for informational purposes only and does not constitute financial advice. Always do your own research before investing.