The repo rate, set by the Reserve Bank of India (RBI), significantly impacts the equity market. Here's how: Impact on Equity Market - *Lower Interest Rates*: When the RBI cuts the repo rate, borrowing becomes cheaper. This encourages companies to invest in new projects, expand operations, and fund innovation, ultimately boosting economic growth and stock prices. - *Increased Consumer Spending*: Lower interest rates lead to reduced loan costs, increasing consumer spending and stimulating growth across sectors. - *Market Sentiment*: A repo rate cut is generally seen as positive for stocks, as it indicates a shift towards monetary easing and economic stimulus ¹ ². Recent Developments - *Repo Rate Cut*: On June 6, 2025, the RBI cut the repo rate by 50 basis points to 5.5%, marking its third consecutive rate cut this year. This move aims to boost economic growth and ease borrowing costs. - *Market Reaction*: Following the rate cut, Indian equity markets rebounded, with Nifty Bank hitting a record high ³. Key Considerations - *Economic Growth*: Lower interest rates can boost economic growth by increasing borrowing and spending. - *Inflation Control*: However, the RBI must balance growth with inflation control, as excessive money supply can lead to inflationary pressures. - *Global Economic Conditions*: Global events, such as changes in US Federal Reserve rates or signs of a global recession, can influence the RBI's stance on repo rates ¹.