Benchmarks trade higher; private bank shares rally

The key equity domestic indices traded with substantial gains in mid-morning trade after the RBI cut the repo rate by 50 bps to 5.50%, amid favourable domestic environment, looking ahead, the MPC will closely monitor evolving domestic and global conditions to guide future policy moves. Market participants are also closely tracking bond markets and global trade dynamics. The Nifty traded above the 24,950 mark.

Private bank shares surged following the RBI's decision to cut the repo rate by 50 basis points to 5.50%, after falling in the previous trading session.

At 11:25 IST, the barometer index, the S&P BSE Sensex, surged 670.08 points or 0.82% to 82,111.72. The Nifty 50 index jumped 223.10 points or 0.90% to 24,976.45.

In the broader market, the S&P BSE Mid-Cap index rose 0.43% and the S&P BSE Small-Cap index added 0.33%.

The market breadth was positive. On the BSE, 2,183 shares rose and 1,546 shares fell. A total of 198 shares were unchanged.

The NSE's India VIX, a gauge of the market's expectation of volatility over the near term, declined 1.82% to 14.81.

RBI Monetary Policy Outcome:

The Reserve Bank of India (RBI) cut the policy repo rate by 50 basis points to 5.50%, signaling a shift in its monetary policy stance from accommodative to neutral.

The decision, announced at the conclusion of the Monetary Policy Committee's (MPC) 55th meeting held from June 4 to 6, 2025, was driven by easing inflation and a stable growth outlook.

With the rate cut coming into effect immediately, the standing deposit facility (SDF) rate now stands at 5.25%, while the marginal standing facility (MSF) rate and the Bank Rate are adjusted to 5.75%.

This decision is in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth.

The RBI maintained its real GDP growth projection for FY26 at 6.5%, with quarterly growth seen at 6.5% in Q1, 6.7% in Q2, 6.6% in Q3, and 6.3% in Q4.

On the inflation front, the RBI revised its forecast downward to 3.7% for FY26 from the earlier estimate of 4%. Quarterly projections suggest CPI inflation at 2.9% in Q1, 3.4% in Q2, 3.9% in Q3, and 4.4% in Q4.

The RBI cited broad-based moderation in inflation over the past six months, with headline CPI now well below target. It noted that both food and core inflation are expected to remain soft, helped by easing global commodity prices amid a global growth slowdown.

Looking ahead, the MPC emphasized a data-dependent approach, stating it will closely monitor evolving domestic and global conditions to guide future policy moves.

The minutes of the MPC meeting will be released on June 20, and the next policy meeting is scheduled from August 4 to 6, 2025.

Buzzing Index:

The Nifty Private Bank index jumped 1.80% to 27,833.60. The index declined 0.10% in the past trading session.

IDFC First Bank (up 5.42%), Axis Bank (up 2.82%), RBL Bank (up 2.68%), Bandhan Bank (up 2.43%), Kotak Mahindra Bank (up 1.91%), HDFC Bank (up 1.54%), IndusInd Bank (up 1.18%), Federal Bank (up 1.04%), Yes Bank (up 0.33%) and ICICI Bank (up 0.23%) surged.

Stocks in Spotlight:

Indian Renewable Energy Development Agency shed 0.74%. The company informed that its board has approved the opening of the issue of qualified institutional placement (QIP) of equity shares with the floor price of Rs 173.83 per equity share.

Life Insurance Corporation of India (LIC) fell 0.15%. The company announced that its current executive director, Ramakrishnan Chander, has assumed charge as the company's new chief investment officer (CIO), effective immediately.

Global Markets:

US Dow Jones futures were up 154 points, signaling a positive start for Wall Street.

Most Asian stocks advanced after a 90-minute phone call between US President Donald Trump and Chinese President Xi Jinping sparked hopes of renewed trade talks. The discussion, centered on rare earth exports, ended with both leaders agreeing to resume negotiations. A US delegation including Scott Bessent, Howard Lutnick, and Jamieson Greer will soon head to China to pick up the dialogue.

Trump called the conversation very good, and both sides even exchanged invitations for state visits.

Back on Wall Street, however, the mood was less upbeat. All three major US indices closed lower overnight. The S&P 500 dropped 0.53%, dragged down by a sharp fall in Tesla shares. The Nasdaq slid 0.83%, and the Dow shed 0.25%.

Tesla plunged over 8% after tensions between Trump and Elon Musk took center stage. Trump said he was very disappointed with Musk, following the Tesla CEO's public criticism of Trump's much-touted policy bill. Musk didn't hold back either, snapping back with, Without me, Trump would've lost.

Meanwhile, fresh US labor data showed initial jobless claims climbed to 247,000 last week, up from a revised 239,000. Private sector job growth also slowed, with just 37,000 jobs added in May compared to 60,000 in April.

These figures set the stage for Friday's crucial nonfarm payrolls report, one that could shape the Fed's next move.

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