S&P BSE Sensex Rallies on RBI Rate Cut as Global Indices Eye Fed Move: Market Wrap & Outlook (5

India’s benchmark S&P BSE Sensex ended the week on a strong note after a surprise rate cut by the Reserve Bank of India (RBI), even as global stock indices from Wall Street to the Gulf traded around record or multi‑year highs on growing expectations of a US Federal Reserve rate cut next week. ^[1]

Between 5 and 7 December 2025, traders digested a flurry of central‑bank signals, soft but steady inflation data and currency volatility, setting up a potentially volatile but upward‑biased week ahead for Sensex, Nifty and major world indices. ^[2]

India: Sensex and Nifty Rebound After Surprise RBI Rate Cut

Closing snapshot – Friday, 5 December

On Friday, 5 December 2025, the S&P BSE Sensex jumped 447 points (≈0.5%) to close around 85,712, while the Nifty 50 advanced roughly 153 points (≈0.6%) to about 26,186. ^[3]

According to exchange data and domestic media:

Sensex settled near 85,712.37, having traded within an intraday band roughly between 85,078 and 85,797. ^[4]
Nifty 50 closed near 26,186.45, mirroring the Sensex’s half‑percent advance. ^[5]
Despite the sharp Friday bounce, both indices finished the week more or less flat, having given up earlier record highs earlier in the week. ^[6]

RBI cuts repo rate to 5.25% — most aggressive easing since 2019

The trigger was a 25‑basis‑point cut in the repo rate by the RBI, taking it to 5.25% and bringing cumulative cuts in 2025 to 125 bps, which Reuters notes is the most aggressive easing cycle since 2019. ^[7]

Key points from the policy and market reaction:

The rate cut surprised a section of the market, given robust Q2 GDP and earlier expectations that the RBI might stay on hold. ^[8]
The central bank also lowered its inflation projections and signalled a pro‑growth stance, while leaving the door open for further easing if data allow. ^[9]
Domestic commentary highlighted this as a “risk‑on” trigger across equities, with analysts expecting the move to support loan demand, lower funding costs and boost rate‑sensitive sectors. ^[10]

Sector moves: Banks, autos, realty and IT in focus

Friday’s rally in the Sensex and Nifty was broad‑based but skewed towards rate‑sensitive sectors and IT exporters: ^[11]

Financials: Heavyweight banks and NBFCs led the move, with financial indices gaining around 1% on the day as investors priced in better loan growth and lower cost of funds.
Autos & real estate: Auto names and real‑estate stocks rose roughly 0.5–0.7%, reflecting expectations of cheaper EMIs and improved housing/vehicle affordability.
IT services: Nifty IT stocks climbed about 3.5% over the week, benefiting from both the RBI cut and growing bets on a Fed rate cut that would support US‑centric tech spending. ^[12]

At the same time, small‑caps and mid‑caps underperformed, with broader indices losing around 0.7–1.8% for the week as traders booked profits after a strong multi‑month run. ^[13]

Currency Pressure and FII Flows: The Other Side of the Rally

Even as the Sensex regained altitude on Friday, currency and foreign flow dynamics stayed on investors’ radar:

Earlier in the week, the rupee weakened to around 90 per US dollar in inter‑bank trading after the spot market closed, reflecting persistent foreign outflows and a stronger dollar. ^[14]
Analysts quoted by Financial Express and News Arena noted that the rupee’s breach of the 90 level and the behaviour of foreign portfolio investors (FPIs) would be key determinants of near‑term index direction. ^[15]

In other words, easy domestic money (RBI cuts) is now colliding with external vulnerabilities (FX weakness and global yields), creating a push‑and‑pull environment for the Sensex and Nifty.

6 December: No Trading, But BSE Tests “New Framework”

Saturday, 6 December 2025, was a non‑trading day for Indian equities, with the BSE and NSE closed as usual over the weekend. ^[16]

However, behind the scenes the BSE conducted a full‑scale mock trading drill across:

Equity & equity derivatives
Commodity derivatives
Currency derivatives

The exercise, held on 6 December, was designed to simulate real market conditions, including trade halts and risk‑reduction scenarios, ahead of a new market framework rollout and in line with SEBI’s testing directives. ^[17]

For traders, this is a structural positive: it suggests the exchange is trying to minimise operational risk and ensure stability as volumes and volatility increase.

7 December: Outlook Pieces Flag Volatility for 8–12 December

With Indian markets closed on Sunday, forecasts and strategy notes took centre stage.

Domestic outlook: “Volatile but positive bias”

A raft of weekend commentary — including pieces from GoodReturns, Financial Express and News Arena India — converged around a few common themes for 8–12 December 2025: ^[18]

US Fed decision is the main global trigger
- The Federal Open Market Committee (FOMC) meets on 9–10 December, with markets pricing in a high probability of another 25‑bps rate cut. ^[19]
- Domestic strategists widely agree that the Fed’s tone on future cuts will be crucial for both global indices and Indian IT and financial stocks.
RBI’s 25‑bps cut is seen as supportive, not reckless
- Commentators describe the policy as “pro‑growth” but still data‑dependent, highlighting sharply lower inflation forecasts and a willingness to act again if needed. ^[20]
- Several brokerage notes expect Sensex and Nifty to consolidate with an upward bias, supported by domestic liquidity and central‑bank easing. ^[21]
Key domestic and geopolitical drivers
- Rupee near 90 vs the dollar and the trajectory of FII flows. ^[22]
- Ongoing India–Russia trade developments and any headline risk on the geopolitical front. ^[23]
- A busy primary market calendar (including the upcoming ICICI Prudential AMC IPO mid‑month and tech listings like Meesho) that can temporarily divert liquidity from secondary markets. ^[24]

Put simply, the base case among local analysts is for range‑bound but constructive price action on the Sensex and Nifty this week, punctuated by sharp intraday moves around the Fed decision and FX headlines. ^[25]

Global Picture: World Indices Ride Rate‑Cut Hopes

Wall Street: Modest gains, big expectations

On Friday, 5 December, Wall Street ended the week with small but meaningful gains:

Dow Jones Industrial Average: +0.22%
S&P 500: +0.19%
Nasdaq Composite: +0.31% ^[26]

Reuters notes that:

The latest batch of US inflation (PCE) and consumer spending data for September came in broadly in line with expectations — PCE up 0.3% month‑on‑month and 2.8% year‑on‑year, with consumer spending also rising 0.3%. ^[27]
Consumer sentiment ticked higher in early December, according to the University of Michigan survey. ^[28]
Traders are now assigning roughly an 85–90% probability to a 25‑bps Fed cut at the upcoming meeting, per the CME FedWatch tool. ^[29]

Beyond the day’s moves, strategists point out that US stock funds are up double‑digits for 2025 and that the main indices are hovering close to their record highs, reflecting a “re‑acceleration trade” in which markets are betting on decent growth, cooling inflation and a series of moderate rate cuts through 2026. ^[30]

Europe: STOXX 600 flat but ekes out weekly gain

In Europe, the STOXX 600 finished Friday more or less flat around 578.9, but still up about 0.4% for the week, extending a prior rally. ^[31]

Highlights:

German DAX gained roughly 0.7% on Friday, helped by political relief after Chancellor Friedrich Merz secured enough support for a pensions bill, easing fears of a government crisis. ^[32]
Across the region, investors were focused on the same US PCE data and Fed expectations that buoyed Wall Street, alongside local corporate stories and sector‑specific news. ^[33]

Asia: Nikkei stumbles, China and others in focus

Asian markets were mixed into the weekend: ^[34]

Japan’s Nikkei 225 dropped around 1.3%, pressured by a sell‑off in Japanese government bonds after the Bank of Japan signalled it was ready to raise interest rates — potentially to 0.75%, the highest since 1995. ^[35]
Other Asian indices were more resilient, with Korean equities and parts of MSCI Asia ex‑Japan edging higher on the same Fed‑cut narrative supporting US and European stocks. ^[36]
Medium‑term, investors are increasingly focused on China, where the MSCI China Index has surged about 30% this year, adding roughly US$2.4 trillion in market value and outpacing the S&P 500 by the widest margin since 2017. ^[37]

Global fund houses such as Amundi, BNP Paribas Asset Management and Fidelity expect Chinese equities to keep grinding higher in 2026 — albeit at a slower pace — as AI‑linked companies and an eventual easing of deflation pressures support earnings. ^[38]

Gulf & frontier markets: Sunday trade confirms the trend

On Sunday, 7 December, when India and most developed markets were closed, Gulf bourses extended the global “rate‑cut rally”:

Saudi Arabia’s Tadawul (TASI) index edged about 0.1% higher, buoyed by a 2.6% rise in Riyad Bank.
Qatar’s index slipped a modest 0.1%, while Egypt’s EGX30 climbed about 0.6%, with Beltone Financial up nearly 7%.
Oil prices had already risen close to 1% on Friday to a two‑week high, helped by rate‑cut hopes and supply risks in Russia and Venezuela. ^[39]

The message from the Gulf: equity investors in energy‑rich markets are also positioning for easier US policy, amplifying a global risk‑on tone that feeds back into emerging‑market indices, including India’s.

Big Picture: How the Macro Backdrop Ties It All Together

The weekend “Take Five” note from Reuters frames the coming days as a central‑bank super‑week: along with the US Fed, policymakers in Canada, Switzerland, Australia and Turkey all meet, while fresh China trade and inflation data land simultaneously. ^[40]

Some broad themes that matter for Sensex, Nifty and world indices:

Global easing cycle vs patchy data
- Markets are confident but not complacent about rate cuts. Futures imply a quarter‑point Fed cut is almost done and dusted, but policymakers remain divided and upcoming inflation prints could still surprise. ^[41]
Stronger dollar vs local currencies
- While the dollar index has cooled and is heading for a second straight weekly loss, currencies like the Indian rupee and Japanese yen remain under scrutiny. A sustained dollar downturn would be a tailwind for EM equities and commodities. ^[42]
Re‑allocation into equities, especially tech and EM
- Global strategists talk about a “re‑acceleration trade”, with 2026 forecasts still bullish on equities — particularly US tech and select emerging markets such as China and India. ^[43]

What This Means for the S&P BSE Sensex and Global Indices

Pulling all of this together, here’s how the 5–7 December 2025 news flow shapes the outlook for the S&P BSE Sensex and key world indices in the very near term:

For the Sensex and Nifty

Short‑term bias: mildly positive, but choppy
- RBI’s repo cut to 5.25% and softer inflation projections are clear positives for domestic risk assets. ^[44]
- However, the rupee’s slide to ~90 per dollar and earlier FII selling imply bouts of volatility on any negative global surprise. ^[45]
Sector‑wise
- Banks, autos, realty and NBFCs are positioned to benefit from cheaper funding costs, though they are also most exposed if FX stress persists. ^[46]
- IT majors could extend gains if the Fed delivers a cut with a dovish tone that supports US corporate spending. ^[47]
Levels and positioning
- With Sensex back near record territory and weekly returns flat, risk‑reward is finely balanced: dips driven by Fed‑related jitters may attract domestic buying, but a sharp global risk‑off move could drag the index back towards recent support zones. ^[48]

For global indices

US indices (Dow, S&P 500, Nasdaq)
- Momentum remains constructive: small daily gains mask a broader trend of markets leaning heavily on the expectation that the Fed will engineer a soft‑landing via gradual cuts. ^[49]
European benchmarks (STOXX 600, DAX, CAC)
- Europe is tracking the US, with modest weekly gains and rate‑cut optimism offset by local political and growth concerns. ^[50]
Asia (Nikkei, MSCI Asia ex‑Japan, China indices)
- Japan is the outlier, wrestling with a potential exit from ultra‑easy policy, which is pressuring equities and lifting the yen. ^[51]
- China‑linked indices remain one of the more interesting stories, with a powerful 2025 rally and mainstream institutions now talking about China as a core allocation again, albeit with more modest return expectations for 2026. ^[52]
Gulf and frontier markets
- Sunday’s gains in Saudi, Egypt and other Gulf exchanges underscore how Fed policy has become the primary global driver, even in markets with different trading weeks and local fundamentals. ^[53]

5 Fast Takeaways for Investors

While this article is not investment advice, here are five practical conclusions many market participants are drawing from the 5–7 December news flow:

Central banks are still in the driver’s seat
- The combination of RBI easing and a likely Fed cut means policy remains supportive for equities — but also increases sensitivity to any surprise from policymakers. ^[54]
Rates and FX matter as much as earnings
- With the rupee at record lows and bond yields in flux, currency and rate risk are as important as earnings growth when valuing Sensex and global stocks. ^[55]
India remains in a “buy‑the‑dip” camp for many global managers
- Strong macro numbers, a pro‑growth RBI and favourable demographics keep India in the long‑term overweight bucket, even if near‑term volatility rises. ^[56]
China is back in the global conversation
- A 30% rally in the MSCI China Index and renewed inflows show that some of the world’s biggest investors see China and broader Asia as key pieces of the 2026 equity puzzle, alongside the US and India. ^[57]
The next 72 hours are crucial
- With the Fed, other central banks and key data all landing in the coming days, index moves from 8–12 December are likely to set the tone for how 2025 closes for the Sensex and world indices.