Rupee Gains as RBI Cuts Repo Rate by 50bps; Sensex Jumps 747 Points, Inflation Target Lowered to 3.7%

The Indian rupee pared early losses and gained 13 paise in Friday’s morning trade following the Reserve Bank of India’s surprise 50 basis point cut in the repo rate aimed at supporting growth.

Forex traders highlighted the RBI’s comprehensive approach, noting that the central bank has maintained growth momentum by combining the rate cut with liquidity measures such as a cumulative 100 basis points reduction in the Cash Reserve Ratio (CRR) over the year. The RBI also revised its inflation target downward to 3.7% for FY26.

At the interbank forex market, the rupee exhibited significant volatility. It opened at 85.91 against the US dollar, down 12 paise from the previous close, but quickly erased losses to reach an early high of 85.66. On Thursday, the rupee had snapped a two-day losing streak, closing 8 paise stronger at 85.79.

The Monetary Policy Committee (MPC) cut the benchmark policy rate to 5.5%, signaling that frontloading rate cuts would provide a boost to the economy. The RBI retained its GDP growth forecast for the current fiscal at 6.5%.

In a significant move to enhance liquidity, the RBI also reduced the CRR by 100 basis points, unlocking ₹2.5 lakh crore for lending to productive sectors.

“This RBI policy is a perfect 10/10, balancing growth and inflation with focused liquidity measures,” said Sadaf Sayeed, CEO of Muthoot Microfin. “The synergy between the government’s fiscal stance and RBI’s monetary policy bodes well for India’s growth trajectory and industrial outlook.”

Meanwhile, the US dollar index, measuring the greenback’s strength against a basket of six currencies, inched up 0.07% to 98.81.

Global crude oil prices softened, with Brent crude futures slipping 0.52% to $65.00 per barrel.

On the domestic equity front, benchmark indices rebounded strongly after early losses, with the Sensex climbing 747.11 points (0.92%) to 82,189.15 and the Nifty gaining 244.70 points (0.99%) to 24,995.80.

Foreign institutional investors (FIIs) remained net sellers, offloading equities worth ₹208.47 crore on Thursday, according to exchange data.

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