Sensex, Nifty see sharp recovery after RBI MPC cuts CRR by 50 bps to 4% – CNBC TV18

The benchmark indices staged a sharp recovery on Friday, December 6, with the S&P BSE Sensex gaining over 400 points and the NSE Nifty50 nearing 24,800 levels.

This rally was seen after the Reserve Bank of India decided to reduce the cash reserve ratio (CRR) by 50 basis points to 4%, easing growth-related investor concerns. However, the central bank kept the repo rate unchanged at 6.5%, aligning with market expectations, and reaffirmed its neutral policy stance.

Following the RBI’s announcement, the stock markets recovered with bank and financial stocks turning green.

The Nifty Bank and Financial Services edged up by 0.3% each. Meanwhile, the Nifty PSU Bank rose by 1% with Canara Bank, Union Bank and Bank of Baroda (BoB) among top gainers around this time.

Among the banking stocks, gains were led by Axis Bank, which was up 1.5. SBI and ICICI Bank also contributed to the rally, rising 0.9% and 0.8%, respectively.

Heavyweights including HDFC Bank and Kotak Mahindra Bank were flat. The HDFC Bank bank was seen trading at ₹1,863, while Kotak Bank was at ₹1,776.

“Reduction in CRR is a positive and should impact the banks positively and ensure liquidity in the system, said Divam Sharma, Founder and Fund Manager at Green Portfolio.

Barring some of the uncertainties that could evolve in macros, Sharma said that the financial system is stable, the RBI decisions are proactive and responsive and the economy is in a comfortable zone. The markets should continue to benefit over the near term.

“From an investment perspective, the RBI’s neutral stance provides much-needed stability. For fund managers, this is an opportune moment to focus on sectors poised to benefit from sustained domestic demand and India’s long-term growth trajectory. While global headwinds remain a concern, India’s strong macroeconomic fundamentals and policy continuity offer a robust foundation for investors to navigate the current landscape with confidence,” said Anirudh Garg- Partner and Fund Manager at Invasset PMS.

The RBI announced a 50 basis points cut to the Cash Reserve Ratio for banks. This is the first instance after March 2020 that the CRR has been cut by the central bank. CRR now stands at 4% from 4.5% earlier and Governor Shaktikanta Das said that the cut in CRR will lead to an infusion of ₹1.16 lakh crore as liquidity into the system.

The governor also said that the reduction in CRR is in line with the central bank’s “neutral” stance.

CRR is a percentage of a bank’s deposits that must be kept with the RBI as reserves.