Mumbai, Dec 5 (PTI) Stock market benchmark indices Sensex and Nifty rallied in morning trade on Friday after the RBI cut interest rates by 25 basis points in a bid to further bolster economic growth.

After volatility in early trade, the 30-share BSE Sensex later bounced back, advancing 318.71 points to 85,584.03. The 50-share NSE Nifty also climbed 95 points to 26,128.75.

Shrugging off concerns over the rupee's depreciation, the RBI has cut the interest rate by 25 basis points to 5.25 per cent in a bid to bolster further economic growth, which rose to a six-quarter high of 8.2 per cent in the second quarter of the current financial year.

The development is expected to make advances, including housing, auto and commercial loans cheaper.

Announcing the fifth bi-monthly monetary policy for the current fiscal, RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) has unanimously decided to cut the short-term lending rate, or repo rate, by 25 basis points to 5.25 per cent, with a neutral stance.

The RBI has sharply raised its growth projection to 7.3 per cent from 6.8 per cent earlier for the current financial year.

"The MPC decided to vote in favour of growth despite ongoing robust growth in the economy. The unanimous nature of the decision in cutting rates by 25 bps reflects the consensus in the MPC that giving a further boost to growth is a risk worth taking even in the context of a depreciating rupee," VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said.

The projection of 7.3 per cent GDP growth for FY 26 is optimistic for the market, he added.

From the Sensex firms, Bajaj Finance, Infosys, HCL Tech, Bajaj Finserv, Tata Consultancy Services and HDFC Bank were among the major winners.

However, Hindustan Unilever, Axis Bank, Sun Pharma and Tata Steel were among the laggards.

Rate-sensitive stocks like auto and real estate were trading higher.

Foreign Institutional Investors (FIIs) offloaded equities worth Rs 1,944.19 crore on Thursday, while Domestic Institutional Investors (DIIs) bought stocks worth Rs 3,661.05 crore, according to exchange data.

In Asian markets, South Korea's Kospi and Shanghai's SSE Composite index traded in positive territory while Japan's Nikkei 225 index and Hong Kong's Hang Seng index quoted lower.

US markets ended on a flat note on Thursday.

Brent crude, the global oil benchmark, dipped 0.16 per cent to USD 63.16 per barrel.

On Thursday, the Sensex edged higher by 158.51 points or 0.19 per cent to settle at 85,265.32. The Nifty climbed 47.75 points or 0.18 per cent to 26,033.75. PTI SUM DRR

Stock markets rally after 25 bps interest-rate cut, boosting rate-sensitive stocks and easing loan costs. The Monetary Policy Committee unanimously cut the repo rate by 25 basis points to 5.25 per cent and retained a neutral stance, raising the fiscal-year growth projection to 7.3 per cent; the decision aims to stimulate growth despite currency depreciation concerns and is expected to lower borrowing costs for housing, auto and commercial loans, prompting a rally in rate-sensitive stocks while portfolio flows showed foreign net selling and domestic institutional buying.