The Nifty Bank index leapt 520 points, closing at 48,200 on Thursday after the RBI’s 25‑basis‑point repo hike to 5.5%—its first increase in more than 3½ years.
The move snapped a 500‑point dip seen earlier in the session, as banks immediately began adjusting their external benchmark lending rates. Rajesh Kumar, senior analyst at ICICI Securities, noted that the index’s 12 constituents are highly rate‑sensitive, explaining the swift rally.
Yet, other rate‑sensitive sectors—automobiles, real‑estate—fell 1.2% and 1.5% respectively, underscoring that the tightening will weigh on asset‑heavy peers. “Rate hikes squeeze margins for banks, but they also improve net interest spreads in the long run,” said Kumar.
RBI Governor Sanjay Malhotra, in a post‑policy address, warned that rate cuts are “off the table” in the near term, hinting that the next move will likely be another hike or a pause.
The central bank also lifted its FY27 GDP growth forecast to 7.1% from 6.7%, while CPI inflation is now pegged at 5.2% versus 5.0% earlier—upward revisions that may temper the market’s optimism.
Looking ahead, the RBI’s upcoming meeting on May 28 will decide whether the 5.5% repo sticks or moves again, while banks will need to adjust deposit rates to match the new benchmark. Analysts expect the index to trade in a tighter range until the next policy decision.