Dalal Street Bounces Back: Rate Cut Hopes Fuel Market Rally After 4-Day Slump

The Indian stock market broke its four-day losing spell with a decisive comeback on Tuesday, as surprisingly soft inflation data ignited hopes for an interest rate cut by the Reserve Bank of India (RBI).

After a nervous start to the week, bulls took firm control of Dalal Street on July 15, 2025. The BSE Sensex jumped 317.45 points, or 0.39%, to close at 82,570.91. Similarly, the NSE Nifty 50 index climbed 113.50 points, or 0.45%, to settle at 25,195.80. The rally was broad-based, with investors showing renewed confidence across sectors, pushing the Nifty Midcap 100 and Smallcap 100 indices up by nearly 1% each.

The Inflation Trigger: A Shot in the Arm for the Market

The primary catalyst for this sharp reversal in sentiment was the June retail inflation data. The Consumer Price Index (CPI) for June fell to a remarkable six-year low of 2.1%. This figure was significantly lower than market expectations and brings inflation well within the RBI’s comfort zone of 2-6%.

This has led to widespread speculation that the central bank may have enough room to cut interest rates to stimulate economic growth. “A significant macro trend is the decline of CPI inflation in June to 2.10 per cent,” said VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited. “It appears that inflation will undershoot RBI’s projection of 3.7 per cent CPI inflation for FY26. This has raised rate cut hopes.” Lower interest rates generally mean lower borrowing costs for companies, which can boost profitability and, in turn, stock prices. It also makes fixed-income investments less attractive compared to equities.

Sectoral Stars and Laggards

The optimism was visible across the board, with all sectoral indices on the NSE closing in the green. The Nifty Auto index was the star performer, surging 1.50% for the day. Hero MotoCorp was the top gainer on the Nifty 50, rocketing up by 4.95% to close at ₹4,462.10. It was followed by Bajaj Auto, which climbed 2.81%.

The Nifty Pharma index also had a strong showing, gaining 1.14%, with Sun Pharma rising 2.76% after settling a patent litigation in the US. Other sectors like FMCG, Realty, and even the recently battered IT index participated in the rally.

However, it wasn’t a good day for everyone. HCL Technologies was the biggest loser on the Nifty, plunging 3.26% after its first-quarter results disappointed investors. The company reported a 9.7% year-on-year decline in consolidated net profit, which overshadowed its positive revenue guidance.

What Does This Mean for Retail Investors?

Today’s rally is a classic example of how macroeconomic data can directly influence the stock market. For retail investors, it serves as a reminder of a few key principles:

• Don’t Panic Sell: The market had been falling for four straight days. Those who held their nerve were rewarded today. Knee-jerk reactions to short-term corrections can often lead to losses.
• Keep an Eye on the Big Picture: Understanding macroeconomic trends like inflation and interest rates can provide valuable context for your investment decisions. The prospect of a rate cut could signal a favourable environment for equities in the medium term.
• Diversification is Key: While auto and pharma stocks shone today, IT stocks like HCL Tech lagged. A well-diversified portfolio helps to smooth out returns and reduces the impact of poor performance in a single stock or sector.

What to Watch Next

While the mood is currently upbeat, investors should remain watchful. Here are a few things to keep on your radar:

• RBI Monetary Policy: The next RBI policy meeting will be the most crucial event. All eyes will be on the central bank’s commentary and whether it signals or delivers a rate cut.
• FII Activity: Foreign Institutional Investors (FIIs) have been net sellers in July so far. A reversal of this trend would provide a major boost to the market.
• Q1 Earnings Season: The earnings season is still underway. Company-specific results will continue to cause stock price movements, as seen with HCL Tech.
• Global Cues: While domestic factors drove today’s rally, global events, including trade negotiations and geopolitical tensions, can always influence market sentiment.

Today was a welcome relief for investors. The sharp drop in inflation has provided a strong, positive trigger, but it’s important to see if this momentum can be sustained in the coming sessions.

This article is only for information purposes and is not investment advice. Before investing, do your own research.