RBI’s Shift to ‘Neutral’ Boosts Rate-Sensitive Stocks: Realty Surges 2%, Banks & Autos Jump 1%

On October 9, rate-sensitive sectors saw a significant boost after the Reserve Bank of India (RBI) changed its policy stance from ‘Withdrawal of Accommodation’ to ‘Neutral.’ This shift raises expectations for a possible interest rate cut in December. However, the RBI kept the repo rate steady at 6.5% for the tenth consecutive time.

RBI Governor Shaktikanta Das announced that five out of six Monetary Policy Committee (MPC) members voted to maintain the repo rate. This is the first change in the RBI’s stance in two years. The central bank also kept its inflation forecast for FY25 at 4.5% and projected a GDP growth rate of 7.2% for the fiscal year.

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Following this announcement, Indian stock markets rose, with the Sensex gaining 608 points (0.75%) to reach 82,243, and the Nifty 50 rising by 208.3 points (0.8%) to 25,221.45. Broader market indices, including midcap and smallcap stocks, also performed well, each rallying by 1.5%.

Banks and Real Estate Shine

The rate-sensitive sectors reacted positively to the RBI’s policy change. The Nifty Realty index jumped over 2%, while the Nifty PSU Bank and Nifty Financial Services indices rose about 1.5% each. The Nifty Bank, Nifty Private Bank, and Nifty Auto also gained more than 1% each.

Within the Nifty Bank index, most stocks were in the green. Punjab National Bank led the charge with over a 2% increase, followed by SBI and Axis Bank. Other gainers included ICICI Bank, IndusInd Bank, and Bank of Baroda, which saw gains between 0.5% and 2%. Only Federal Bank and IDFC First Bank were in the red.

In the financial services sector, Shriram Finance surged 4%, with HDFC AMC and Chola Finance rising over 3%. Several other major financial firms also posted gains between 1% and 3%.

According to Suresh Darak, founder of Bondbazaar, the RBI is taking a careful approach by focusing on domestic inflation and financial stability. He noted that recent global events have driven up oil prices, which could impact inflation, influencing the MPC’s decision to hold rates steady.

Strong Performance in Auto and Realty Sectors

Exide Industries led the auto sector with over a 4% increase, while Bosch, Tata Motors, and Motherson Sumi rose by more than 2%. Other auto stocks like TVS Motor Company, Balkrishna Industries, Maruti Suzuki, and Apollo Tyres also climbed by over 1%.

In real estate, Lodha and Prestige Estates were top performers, rising over 4%. Brigade Enterprises, Oberoi Realty, Mahindra Lifespace, and DLF all saw gains exceeding 1%.

Ramani Sastri, Chairman and Managing Director of Sterling Developers, commented on the RBI’s decision, highlighting that keeping the repo rate unchanged means no immediate change for home loan EMIs. He emphasized that a rate cut would help boost the real estate market, especially with the festive season approaching, and expressed optimism about continued growth in the sector.

As the festive season nears and market sentiment remains positive, rate-sensitive sectors like real estate, banking, and auto are expected to keep rising. The potential for a rate cut in December could further enhance growth in these areas.