Derivatives and Quantitative Strategist

Gaudenz Schneider

Event-Driven

<ul>
<li>
Context: On June 6, 2025, the Reserve Bank of India (RBI) unexpectedly cut interest rates by 50 basis points to 5.5%, double the anticipated 25 basis points.</li>
<li>
The <a href="https://www.smartkarma.com/entities/nifty-index" target="_blank" data-smartkarma-citation="entities:23617:1" rel="noopener">NIFTY 50 Index</a> fluctuated initially but later stabilized at a 1.0% gain, while the <a href="https://www.smartkarma.com/entities/nse-nifty-bank-index" target="_blank" data-smartkarma-citation="entities:26811:1" rel="noopener">NSE Nifty Bank Index</a> rose 1.5%. At-the-money implied volatility changed little, while the skew rotated.</li>
<li>
This Insight explains the RBI’s bold policy move, market reactions, and limitations of predictive models in navigating central bank decisions.</li>
</ul>



Context: On June 6, 2025, the Reserve Bank of India (RBI) unexpectedly cut interest rates by 50 basis points to 5.5%, double the anticipated 25 basis points.

The NIFTY 50 Index fluctuated initially but later stabilized at a 1.0% gain, while the NSE Nifty Bank Index rose 1.5%. At-the-money implied volatility changed little, while the skew rotated.

This Insight explains the RBI’s bold policy move, market reactions, and limitations of predictive models in navigating central bank decisions.


India's Unexpected 0.5% Rate Cut: Friday’s Market Reaction Breakdown

<ul>
<li>The Reserve Bank of India (RBI) is set to announce a monetary policy decision on Friday, 6 June 2025.</li>
<li>
Market Expectations: The consensus anticipates a 25-basis-point rate cut, lowering the rate from currently 6.00% to 5.75%. Historically, one in four RBI rate decisions is a surprise to the market.</li>
<li>This Insight investigates past market behavior during comparable RBI policy announcements, unearthing a surprising statistic about how the Nifty 50 might react to June's decision, regardless of the outcome.</li>
</ul>


The Reserve Bank of India (RBI) is set to announce a monetary policy decision on Friday, 6 June 2025.

Market Expectations: The consensus anticipates a 25-basis-point rate cut, lowering the rate from currently 6.00% to 5.75%. Historically, one in four RBI rate decisions is a surprise to the market.
This Insight investigates past market behavior during comparable RBI policy announcements, unearthing a surprising statistic about how the Nifty 50 might react to June's decision, regardless of the outcome.


Nifty 50 and the RBI Rate Decision: History Has a Pattern

Equity Derivatives and Volatility Specialist, Clifton Derivatives

John Ley

Equity Derivatives and Volatility Specialist

Clifton Derivatives

Independent derivative and volatility research firm focusing on events/catalysts, earnings, relative value and cross asset volatility strategies.

Equity Derivatives

<ul>
<li>Nifty had limited movement this week with the rally off the April low stalling out.</li>
<li>Elevated volatility metrics contrast with an otherwise quiet tape over the past week. We recommend taking some chips off the table, taking advantage of vol levels. </li>
<li>Nifty has given up about 1/2 its outperformance vs the SP500 over the past couple of weeks. </li>
</ul>


Nifty had limited movement this week with the rally off the April low stalling out.
Elevated volatility metrics contrast with an otherwise quiet tape over the past week. We recommend taking some chips off the table, taking advantage of vol levels. 
Nifty has given up about 1/2 its outperformance vs the SP500 over the past couple of weeks. 


Nifty Index Options Weekly (May 26 – 30): Rally Pauses, Vol Holds at Elevated Levels

Quantitative Researcher, MRM Research

Nico Rosti

Quantitative Researcher

MRM Research

Quantitative Research

<ul>
<li>As reported by <a href="https://www.smartkarma.com/profiles/brian-freitas" target="_blank" data-smartkarma-citation="accounts:4091" rel="noopener">Brian Freitas</a> , one of the <a href="https://www.smartkarma.com/entities/nifty-index" target="_blank" data-smartkarma-citation="entities:23617:1" rel="noopener">NIFTY Index (NIFTY INDEX)</a> 's component (Zomato: <a href="https://www.smartkarma.com/entities/eternal-limited" target="_blank" data-smartkarma-citation="entities:28820:1" rel="noopener">Eternal (ETERNAL IN)</a> ) will be subject to big passive selling beginning on Tuesday.</li>
<li>Let's have a look at the <a href="https://www.smartkarma.com/entities/nifty-index" target="_blank" data-smartkarma-citation="entities:23617:1" rel="noopener">NIFTY Index (NIFTY INDEX)</a> to evaluate the tactical outlook according to our model.</li>
<li>Since our <a href="https://www.smartkarma.com/insights/nifty-index-outlook-back-in-an-uptrend-where-to-buy-this-dip" target="_blank" rel="noopener">last BUY recommendation in a previous insight in early May</a>, the index has made some progress uptrending, let's see if the rally can continue...</li>
</ul>


As reported by Brian Freitas , one of the NIFTY Index (NIFTY INDEX) 's component (Zomato: Eternal (ETERNAL IN) ) will be subject to big passive selling beginning on Tuesday.
Let's have a look at the NIFTY Index (NIFTY INDEX) to evaluate the tactical outlook according to our model.
Since our last BUY recommendation in a previous insight in early May, the index has made some progress uptrending, let's see if the rally can continue...


NIFTY Index Outlook (With an Eye on Zomato’s Passive Selling Starting...)

Head of Trading/ Partner, AceGama Advisors

Sankalp Singh

Head of Trading/ Partner

Proprietary Trading Desk

AceGama Advisors

Trading desk specializing in the Listed & OTC options strategies for risk management & investment purposes.

<ul>
<li>Indo-Pak ceasefire triggers risk-premia markdowns – Monthly IVs -4.0 vols lower, Skew &amp; Smile get compressed  </li>
<li>Vol-Regime stays in “High &amp; Up” state with high likelihood of switching to “High &amp; Down” in the upcoming week.  </li>
<li>IV term-structure flattened as the week progressed. Leaving front-end vol-differentials in Contango &amp; Back-end Backwardation now eased to +0.60 vols.  </li>
</ul>


Indo-Pak ceasefire triggers risk-premia markdowns – Monthly IVs -4.0 vols lower, Skew &amp; Smile get compressed  
Vol-Regime stays in “High &amp; Up” state with high likelihood of switching to “High &amp; Down” in the upcoming week.  
IV term-structure flattened as the week progressed. Leaving front-end vol-differentials in Contango &amp; Back-end Backwardation now eased to +0.60 vols.  


NSE NIFTY50/ Vol Update / Indo-Pak Ceasefire! Large Markdowns in IV-Skew-Smile Triggered

India

The NIFTY 50 index is National Stock Exchange of India's benchmark stock market index for Indian equity market. Nifty is owned and managed by India Index Services and Products (IISL), which is a wholly owned subsidiary of the NSE Strategic Investment Corporation Limited.

NIFTY Index (NIFTY INDEX)

India's Unexpected 0.5% Rate Cut: Friday’s Market Reaction Breakdown

RBI surprises with 50 bps rate cut, NIFTY 50 and NSE Nifty Bank rise. Insight on market reactions and implied volatility.

Gaudenz Schneider

Nifty 50 and the RBI Rate Decision: History Has a Pattern

On Friday, 10:00 am IST the RBI will release its monetary policy statement - live broadcast on the RBI's youtube channel. Both the Nifty 50 and the...

Gaudenz Schneider

Nifty Index Options Weekly (May 26 – 30): Rally Pauses, Vol Holds at Elevated Levels

Nifty's rally stalls, volatility remains high, we recommend reducing exposure while also taking advantage of elevtaed volatility.

John Ley

NIFTY Index Outlook (With an Eye on Zomato’s Passive Selling Starting...)

NIFTY Index's component Zomato (ETERNAL IN) to face passive selling from Tuesday, this insight evaluates the index's current tactical outlook...

Nico Rosti

NSE NIFTY50/ Vol Update / Indo-Pak Ceasefire! Large Markdowns in IV-Skew-Smile Triggered

Indo-Pak ceasefire leads to lower risk-premia. Volatility regime remains "High & Up" with potential switch to "High & Down" next week. IV term...

AceGama Advisors

India's Unexpected 0.5% Rate Cut: Friday’s Market Reaction Breakdown

​RBI surprises with 50 bps rate cut, NIFTY 50 and NSE Nifty Bank rise. Insight on market reactions and implied volatility.

Gaudenz Schneider

Nifty 50 and the RBI Rate Decision: History Has a Pattern

On Friday, 10:00 am IST the RBI will release its monetary policy statement - live broadcast on the RBI's youtube channel. Both the Nifty 50 and the...

Gaudenz Schneider

Nifty Index Options Weekly (May 26 – 30): Rally Pauses, Vol Holds at Elevated Levels

​Nifty's rally stalls, volatility remains high, we recommend reducing exposure while also taking advantage of elevtaed volatility.

John Ley

NIFTY Index Outlook (With an Eye on Zomato’s Passive Selling Starting...)

​NIFTY Index's component Zomato (ETERNAL IN) to face passive selling from Tuesday, this insight evaluates the index's current tactical outlook...

Nico Rosti

NSE NIFTY50/ Vol Update / Indo-Pak Ceasefire! Large Markdowns in IV-Skew-Smile Triggered

​Indo-Pak ceasefire leads to lower risk-premia. Volatility regime remains "High & Up" with potential switch to "High & Down" next week. IV term...

AceGama Advisors

RBI surprises with 50 bps rate cut, NIFTY 50 and NSE Nifty Bank rise. Insight on market reactions and implied volatility.

Nifty's rally stalls, volatility remains high, we recommend reducing exposure while also taking advantage of elevtaed volatility.

NIFTY Index's component Zomato (ETERNAL IN) to face passive selling from Tuesday, this insight evaluates the index's current tactical outlook...

Indo-Pak ceasefire leads to lower risk-premia. Volatility regime remains "High & Up" with potential switch to "High & Down" next week. IV term...