Market Set to Surge After RBI’s Policy Move

Market Set to Surge After RBI’s Policy Move

A spike in open interest at Nifty’s 25000 weekly put suggests market participants are betting big on further upside following the RBI’s recent rate move.

Summary:
Market sentiment has shifted notably to a more optimistic outlook after the RBI’s recent policy decision, as evidenced by a significant increase in open interest at Nifty’s 25000 weekly put strike according to derivatives data. This indicates traders are gearing up for a sustained market rally, expecting upward momentum to continue as macroeconomic indicators improve and liquidity remains ample. The action is being interpreted as a green light for further equity upside in the near term.

RBI’s Bold Move Triggers Fresh Market Optimism
The Indian equity market appears primed for a fresh leg of the rally, riding high on the positive momentum unleashed by the Reserve Bank of India’s recent monetary policy decision. After the surprising 50 basis point reduction in the repo rate to 5.5%, investor morale has noticeably risen, fueling bullish expectations across various sectors.
While analysts had anticipated a more moderate rate cut, the RBI’s aggressive stance has been widely interpreted as a proactive measure to support economic growth, tame inflationary expectations, and ease liquidity constraints. The outcome? An energized stock market and a notable repositioning in the derivatives segment indicate expectations of further gains.

Derivatives Market Buzz: All Eyes on the 25000 Put
One of the strongest indicators of rising bullishness comes from the sharp jump in open interest at the Nifty 50’s weekly 25000 strike put option, expiring on Thursday. This move suggests traders are hedging less and instead positioning to benefit from a continuing uptrend.
A surge in open interest (OI) in put options—intense out-of-the-money ones like the 25000 strike—can often be interpreted in two ways: as either a protective hedge or a confident bet that the market is likely to remain significantly above that level. In this case, the context points squarely to the latter. Traders appear to be writing puts (i.e., selling them) at this level, confident that the Nifty will not breach 25000 and expecting premiums to decay as the index climbs higher.
The India VIX, a gauge of expected volatility, has also declined in recent sessions, further supporting the case for a steady uptrend in the short term.

Macro Factors Supporting the Rally
1. Easing Interest Rate Cycle:
The recent rate cut by the RBI marks a total reduction of 100 basis points in this current cycle of easing. Lower borrowing costs are expected to boost credit demand, consumption, and capex—especially in rate-sensitive sectors like auto, real estate, banking, and consumer durables.
2. Benign Inflation Outlook:
Despite global commodity price volatility, India’s CPI inflation has remained within the RBI’s comfort zone. With the central bank now adopting a more neutral stance, inflation appears manageable, giving more room for policy flexibility if required.
3. Strong Corporate Earnings:
Recent quarterly results from India Inc. have exceeded expectations, especially in IT, banking, and capital goods. With robust topline growth and improving operating margins, investor confidence in the medium-term earnings trajectory remains firm.
4. Global Liquidity Tailwinds:
With central banks globally turning dovish, global liquidity continues to favour emerging markets. India, with its stable macroeconomic fundamentals and political stability, is seen as a preferred destination for Foreign Institutional Investors (FIIs).

Technical Indicators Turn Positive
Technical charts also support the bullish narrative. The Nifty has decisively breached key resistance levels and is now trading above all critical moving averages—20-DMA, 50-DMA, and 200-DMA—indicating strength across timeframes. Market breadth has improved significantly, with more stocks advancing than declining.
Momentum oscillators like RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence) show bullish crossovers, reinforcing the uptrend. The immediate resistance for Nifty lies near the 23,500 zone, while strong support is now placed around 22,850–23,000 levels.

Sectoral Trends: Who Benefits the Most?
Banking & Financials: Rate-sensitive stocks are expected to benefit from the RBI’s decision. PSU banks, in particular, have seen renewed buying interest in improving asset quality and better provisioning buffers.
Real Estate: Lower interest rates will boost housing demand, especially in affordable and mid-income segments. Real estate stocks rallied sharply after the policy announcement.
Auto & NBFCs: Easing auto loan rates and providing better affordability are likely to support demand in the automobile sector. NBFCs also stand to benefit from the cheaper cost of funds.
Infrastructure & Capital Goods: Government capex and monetary support should revive infrastructure spending, pushing up demand for construction and capital equipment companies.

Retail Participation Rises
Retail investors have also been actively participating in the current uptrend, as indicated by increasing trading volumes in small- and mid-cap stocks. Direct retail ownership in equities is at record levels, supported by robust SIP inflows, and this cohort is expected to drive the next phase of the rally.

What Lies Ahead?
While the mood is buoyant, analysts caution against complacency. Global factors such as U.S. Fed commentary, crude oil prices, and geopolitical tensions could create short-term volatility. Nonetheless, India’s relative insulation from global turmoil, along with proactive policymaking, makes it a strong candidate for sustained outperformance.
The upcoming earnings season and inflation data will be crucial in determining the longevity of the rally. However, the current positioning by traders, especially the put writing at 25000, suggests that markets are likely to trend higher in the short term unless hit by a major external shock.

Conclusion
The Indian stock market appears to be entering a fresh, bullish phase after the RBI’s decisive rate cut. Backed by favourable macro conditions, supportive policy, strong technical, and growing retail and institutional participation, the stage is set for further upside. The surge in Nifty’s 25000 put OI only reinforces the view that the bulls are taking charge, and the market is geared for an extended rally.

The image added is for representation purposes only