The stocks of rate sensitive sectors - banking, real estate and automobiles – ended lower after the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) kept the repurchase (repo) rate unchanged at 6% in its fifth bi-monthly monetary policy review.
The Nifty PSU Bank, the largest loser among sectoral indices, settled the day 2% lower at 3,751. The Nifty Private Bank and Nifty Bank
indices were down 1% each, as compared to 0.7% decline in the Nifty50 index. Nifty Auto and Nifty Realty
index were down 0.78% and 0.41%, respectively.
"Given that interest rates are unlikely to reduce at least in the near to medium term, rate sensitive stocks slid due to rising oil price and concern over fiscal slippage," said Vinod Nair, Head of Research, Geojit Financial Services.
Meanwhile, A K Prabhakar, head of research at IDBI Capital expects rate sensitive stocks to perform well in the short term.
"As the move was expected, there is no major change to the outlook on rate-sensitive stocks. I believe the recovery is on cards for banking, auto and real estate sectors, more so for public and private sector banks and NBFCs because they have underperformed the market," he said.
G Chokkalingam, Founder, Equinomics Research & Advisory believes interest rate cycle has bottomed out in India. He advised booking profits in the realty stocks.
"As the RBI
kept rates unchanged, many banking stocks and also other rate-sensitive sectors such as automobile stocks corrected quite significantly. These two sectors along with Sun pharma pulled down the benchmark indices. However, surprisingly, realty stocks remained firm. This is a good opportunity for the retail investors to book profits in realty stocks using current robust movement in this sector. A majority of realty stocks do not have valuation comfort. Realty sales are yet to pick up significantly. Many realty firms hold inventories which are 100% to 200% of annualized sales. Hence, there is bubble in some of the reality stocks," he said.
Speaking about the recapitalisation plans of PSBs, the MPC said that it will help in improving credit flow.
"Recapitalisation of public sector banks may help improve credit flows further. The overall business situation, which is expected to improve in the fourth quarter, is likely to be supported by the recapitalisation plan," RBI's policy document said.