Month: December 2025

The Indian equity markets witnessed a mixed session today, marked by sharp intraday swings and sectoral divergence. The Nifty 50 managed to close above the crucial 26,000 mark, signaling resilience despite profit booking in select pockets. Meanwhile, the Sensex ended flat, reflecting the tug-of-war between bulls and bears in a volatile environment.

Market Overview

• Nifty 50: Closed above 26,000, supported by strength in media and select financial stocks.
• Sensex: Ended nearly unchanged, highlighting the cautious sentiment among investors.
• Sectoral Performance: Auto stocks dragged the indices lower, while media and select PSU names provided support.

Sectoral Highlights

• Autos Drag: The auto sector faced selling pressure as concerns over demand outlook and rising input costs weighed on investor sentiment. Leading auto majors saw declines, pulling the broader indices lower.
• Media Shines: Media stocks outperformed, with several companies posting strong gains on expectations of improved advertising revenues and festive season demand.
• Financials & PSU Banks: Select financial names and PSU banks provided stability, helping Nifty sustain above 26,000 despite volatility.

Market Sentiment

The session was characterized by high intraday volatility, with investors balancing global cues, domestic macroeconomic data, and sector-specific developments. While the broader market breadth remained mixed, the ability of Nifty to hold above 26,000 is seen as a positive sign for near-term momentum.

Outlook

Analysts suggest that the market may continue to witness volatility in the coming sessions, with global factors such as crude oil prices, US Federal Reserve commentary, and foreign institutional flows playing a key role. Domestically, sector rotation is expected to continue, with investors closely tracking earnings and policy updates.

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In summary, while autos dragged and media stocks shone, the Nifty’s ability to stay above 26,000 reflects underlying strength in the market. Investors are advised to remain cautious yet optimistic, with selective sectoral opportunities likely to drive near-term gains.

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In a significant move that underscores the effective transmission of monetary policy, the State Bank of India (SBI) has announced a reduction in its lending rates by 25 basis points (bps), aligning with the Reserve Bank of India’s (RBI) recent repo rate cut. This decision, effective from mid-December 2025, is expected to provide substantial relief to retail, MSME, and corporate borrowers, while also stimulating demand across key sectors of the economy.

Key Highlights of SBI’s Rate Cut

• External Benchmark Linked Rate (EBLR): Reduced by 25 bps to 7.90%, directly mirroring the RBI’s repo rate cut.
• Marginal Cost of Funds-Based Lending Rate (MCLR): Lowered by 5 bps across tenures, with the one-year MCLR now at 8.70%.
• Base Rate/BPLR: Adjusted downward to 9.90% from 10%, effective December 15, 2025.
• Deposit Rates: Retail term deposit rates (below ₹3 crore) for select tenures have also been trimmed by 5 bps, reflecting the overall easing stance.

Impact on Borrowers

• Retail Borrowers: Home loans, auto loans, and personal loans linked to EBLR will immediately become cheaper, reducing monthly EMIs and improving affordability.
• MSMEs and Corporates: Lower borrowing costs will ease financial stress, encourage expansion, and support investment in new projects.
• Transmission Efficiency: While EBLR-linked loans adjust quickly to repo rate changes, MCLR-based loans reflect changes more gradually, ensuring broader coverage over time.

Broader Economic Context

The RBI’s repo rate cut, its fourth in 2025, was aimed at supporting growth amid global uncertainties and moderating inflationary pressures. SBI’s swift action demonstrates its leadership as India’s largest lender in ensuring policy benefits reach the economy. The reduction in lending rates is expected to:

• Stimulate demand in housing, automobile, and consumer finance sectors.
• Encourage businesses to expand capacity and investments.
• Provide relief to households facing inflationary challenges.

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Conclusion

SBI’s decision to cut lending rates by 25 bps is a welcome relief for borrowers and a positive step for the economy. By aligning with the RBI’s monetary easing, the bank ensures faster transmission of policy benefits, supporting both consumer demand and business investment. This move strengthens confidence in India’s financial system and sets the stage for more inclusive growth in FY26.

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India’s retail inflation outlook has received a positive boost with SBI Research estimating a potential decline of up to 35 basis points (bps) in FY2025-26, driven by the ongoing Goods and Services Tax (GST) rate rationalisation. The report highlights that the reforms, which began showing impact between September and November 2025, have already reduced Consumer Price Index (CPI) inflation by around 25 bps, with further relief expected in the coming fiscal year.

Key Highlights of SBI Research Findings

• Immediate Impact: Between September and November 2025, CPI inflation fell by 25 bps due to GST rationalisation.
• Projected Decline: The total reduction in retail inflation could reach 35 bps in FY26, offering households some respite from persistent price pressures.
• Earlier Estimates Revised: SBI Research had initially projected an 85 bps decline, but item-by-item analysis revealed a more modest impact so far.
• Regional Variations: States like Kerala continue to face higher inflation, with rural inflation at 9.34% and urban inflation at 6.33% in November 2025, largely due to rising gold prices and rupee depreciation.
• Broader Context: While GST reforms are expected to ease inflation, external factors such as currency depreciation and global commodity prices may offset some of the gains.

Why GST Rationalisation Matters

GST reforms aim to simplify the tax structure, reduce cascading effects, and bring uniformity across goods and services. By lowering tax rates on essential items and rationalising slabs, the reforms directly influence consumer prices. This not only benefits households but also supports the Reserve Bank of India’s efforts to maintain price stability without aggressive monetary tightening.

Economic Implications

The projected decline in inflation could:

• Boost Consumer Sentiment: Lower prices enhance purchasing power, encouraging spending.
• Support Growth: Reduced inflationary pressures may allow the RBI to maintain stable interest rates, fostering investment.
• Strengthen Fiscal Balance: Rationalised GST collections can improve compliance and revenue efficiency, aiding government finances.

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Conclusion

The anticipated 35 bps decline in retail inflation due to GST reforms marks a significant step toward stabilizing India’s economy in FY26. While challenges from global markets and currency movements remain, the reforms provide a cushion for households and businesses alike. As India prepares for the next fiscal year, the synergy between tax rationalisation and monetary policy will be crucial in sustaining growth and ensuring affordability for consumers.

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Raamdeo Agrawal, Chairman and Co-Founder of Motilal Oswal Financial Services, highlighted in his latest Wealth Creation Study that while Asian Paints was his standout pick last year, he now sees IndiGo (InterGlobe Aviation) as a strong opportunity going forward.

Wealth Creation Study

For nearly three decades, Raamdeo Agrawal has published his annual Wealth Creation Study, a widely followed report that analyzes long-term investment trends in India. The study began in 1996 as a statistical review but has since evolved into a thematic exploration of how wealth is created in Indian markets. Each year, Agrawal anchors the study around a key investment philosophy, testing it against Indian market data.

Asian Paints – Last Year’s Highlight

In the previous edition of the study, Asian Paints was spotlighted as a model wealth creator. The company’s consistent growth, strong brand positioning, and ability to compound earnings made it a benchmark example of quality investing. Agrawal emphasized how Asian Paints has delivered steady returns over decades, making it a classic case of a “compounder” stock.

IndiGo – Current Opportunity

This year, Agrawal has shifted focus to IndiGo, India’s largest airline by market share. He believes IndiGo represents a compelling opportunity due to:

• Dominant market position in Indian aviation.
• Strong demand outlook as air travel continues to expand in India.
• Operational efficiency and cost leadership compared to peers.
• Potential for long-term compounding, similar to how Asian Paints has delivered consistent returns.

Agrawal’s view is that India’s rising middle class and increasing disposable income will drive sustained growth in aviation, positioning IndiGo as a major beneficiary.

Broader Outlook

Beyond individual stocks, Agrawal remains optimistic about India’s economic trajectory. He sees the country entering a multi-trillion-dollar growth era, with GDP potentially reaching $16 trillion by 2042. His thesis is that India is only getting wealthier, and companies with strong fundamentals and leadership will continue to create wealth for investors.

In summary: Last year, Raamdeo Agrawal’s Wealth Creation Study spotlighted Asian Paints as a model compounder. This year, he identifies IndiGo as a promising opportunity, driven by India’s booming aviation sector and the airline’s dominant market position.

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Indian equity markets ended the week on a strong note, with benchmark indices closing firmly in the green on Friday, December 12, 2025. The BSE Sensex surged 449 points to settle at 85,267.66, while the NSE Nifty50 climbed 148 points to finish at 26,046.95, marking a decisive close above the psychological 26,000 level.

Market Drivers

The rally was led by metal and realty stocks, which outperformed broader indices. Tata Steel gained nearly 3%, supported by strong demand outlook and firm global commodity prices. Realty counters also witnessed robust buying interest, reflecting optimism about sustained housing demand and infrastructure growth.

Other notable gainers included L&T, Hindalco, Ultratech Cement, Adani Ports, Bajaj Finance, BEL, NTPC, Axis Bank, Jio Finance, Maruti Suzuki, Power Grid, and Reliance Industries. On the flip side, IT and pharma stocks lagged, with profit booking seen in Wipro, Infosys, Sun Pharma, and HUL.

Global and Domestic Sentiment

Investor sentiment was buoyed by positive global cues and optimism around India–US trade negotiations. Reports of constructive discussions between Prime Minister Narendra Modi and US President Donald Trump added to the bullish tone. Domestically, expectations of stable inflation data and continued government focus on infrastructure spending further supported the rally.

Sectoral Performance

• Metals: Strong demand outlook and rising global prices lifted stocks like Tata Steel and Hindalco.
• Realty: Continued momentum in housing and commercial projects drove gains across the sector.
• Banking & Financials: Axis Bank, Bajaj Finance, and Jio Finance contributed significantly to the rally.
• IT & Pharma: Witnessed mild profit booking, capping broader gains.

Broader Market Action

Midcap and smallcap indices also closed higher, reflecting broad-based participation. The overall market breadth remained positive, with more stocks advancing than declining.

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Outlook

With the Nifty firmly above 26,000 and the Sensex nearing 85,300, analysts believe the market could maintain its upward trajectory if global cues remain supportive and domestic macro data stays stable. Metals and realty are expected to remain in focus, while IT and pharma may see selective consolidation.

In summary, Friday’s closing bell highlighted strong investor confidence, broad-based sectoral gains, and a clear breakout for benchmark indices, setting the stage for continued momentum in the coming sessions.

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