RBI MPC | Rate-sensitive stocks trade mixed after RBI Monetary Policy

Rate-sensitive stocks traded mixed after the Reserve Bank of India left the key repo rate unchanged at 6.5 percent for the seventh time in a row, in line with market expectations.

Auto stocks such as Bajaj Auto, TVS Motors, Maruti Suzuki and Ashok Leyland traded marginally lower. Banking stocks traded mixed. While HDFC Bank gained 1 percent, Kotak Mahindra Bank was up 0.66 percent and State Bank of India 0.3 percent, other lenders such as Axis Bank fell 1 percent and Indusind Bank and ICICI Bank lost 0.6 percent each.

BSE Realty sector was up over 1 percent with Mahindra Lifespace Developer up 6 percent, Oberoi Realty 1.8 percent, Lodha 1.33 percent and DLF 1.2 percent.

Anuj Puri, chairman of ANAROCK Group, said that despite inflation remaining slightly above the RBI’s target, the Indian economy is robust. This decision will sustain the momentum in residential real estate sales, allowing aspiring homebuyers to proceed with confidence.

In its first meeting of FY 25, the rate-setting panel left the stance unchanged as withdrawal from accommodation. Repo is the rate at which the central bank lends money to banks for the short term. Between May 2022 and February 2023, the rate-setting panel raised the repo rate by 250 basis points (bps) but has since held it steady. One basis point is one-hundredth of a percentage point.

“The Reserve Bank of India’s decision to hold rates in tight territory suggests it wants to see inflation come down further toward its target before it pivots — a stance that needlessly sacrifices growth. Core price pressures are already retreating sharply, and a slump in gross value added growth points to weakness in the economy. We expect the RBI to begin an easing cycle in August. But the longer it keeps rates elevated, the greater the risk that the economy will fail to realise its higher growth potential”, said Abhishek Gupta analysts from Bloomberg.

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