Sensex Surges 300 Points Amid RBI Action and Tax Changes Favouring Foreign Investors

Indian Stock Market Sees Strong Rally Amid RBI's Repo Rate Decision

The Indian stock market experienced a significant boost in Friday's trading session, with the Sensex and Nifty 50 indices rallying in response to the Reserve Bank of India's (RBI) decision to hold the repo rates unchanged at 5.25%. The Sensex jumped 300 points, surpassing the 74,500 mark, while the Nifty 50 traded near the 23,500 mark. The Bank Nifty also rose over 250 points to 54,572.

Market sentiment remained largely upbeat across various sectors, with most Nifty indices advancing during the session. The Nifty Media led the gains, rising more than 3%, followed by strong performances from the Realty and Financial Services sectors. Banking, PSU Bank, and Consumer Durables stocks witnessed healthy buying interest. However, the Metal, FMCG, IT, and Oil & Gas indices edged lower, reflecting mild profit-taking in defensive and commodity-oriented segments.

The RBI's decision to maintain the policy repo rate at 5.25% was a key factor driving the Indian stock market. Despite inflation concerns and growing tensions in the Middle East, the RBI chose to hold rates steady. This decision was likely influenced by the Indian government's announcement of a capital gains tax exemption for foreign institutional investors and the Bank for International Settlements on income generated from interest payments or the sale of government securities.

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The Indian government's move to exempt foreign institutional investors from capital gains tax on government securities is intended to attract more stable foreign investment flows. This comes at a time when the rupee has depreciated by more than 5% this year, pressured by higher oil prices and persistent outflows from the equity market.

The rupee strengthened by 11 paise to 95.63 against the US dollar in early trading on Friday, as investors awaited the RBI's policy announcement and drew optimism from positive developments in India-US trade negotiations. Forex market participants noted that the 96 level continues to be a key resistance zone for the USD/INR pair, and that a cautious stance from the RBI on inflation and currency stability could lead to a gradual appreciation of the rupee towards the 95.00–95.20 range in the near term.