Auto, realty stocks register gains post-RBI rate hike

Reacting positively to the moderate rate hike announced by the Reserve Bank today, shares of rate- sensitive auto and realty companies rose in the range of 1-3 per cent at mid-session.

Analysts said the rake hike was moderate and largely in line with the expectation of market participants.

Two-wheeler major Hero Honda zoomed 2.34 per cent and was the top gainer on the BSE benchmark Sensex. The country's top truck maker, Tata Motors, jumped 1.63 per cent, while rival M&M rose 1.5 per cent.

"We view the step taken by the RBI as quite legitimate in view of the strong signs of generalised inflation in the economy seen over the last few months and to check demand side pressures," SMC Global Securities Chairman & Managing Director Subhash C Aggarwal said.

Maruti Suzuki, the country's largest car-maker, surged by 1.05 per cent on the Bombay Stock Exchange.

A sharp gain in auto stocks also helped the BSE auto index emerge as the best gainer among the 13 sectoral indices of the exchange. The BSE auto index was quoting at 8,260.29, up by 1.48 per cent.

The realty sector was also firm following the rate hike and frontline stocks were trading higher at mid-day on the BSE.

Real estate giant DLF moved forward by 1.18 per cent and DB Realty by 3.57 per cent.

The BSE realty index was trading at 3,430.65, higher by 0.57 per cent.

The Reserve Bank today raised its short-term lending and borrowing rates by 0.25 per cent and 0.5 per cent, respectively, to bring inflation down to 6 per cent by March, 2011, from double digits now, but the move would put pressure on banks' interest rates.

In its monetary review, the central bank, however, kept its cash reserve ratio, the amount of funds which banks are required to keep with the RBI, unchanged.

"The increase in repo and reverse repo rates by 25 bps and 50 bps is largely in line with the expectation of the market participants," Kotak Mahindra Old Mutual Life Insurance Chief Investment Officer Sudhakar Shanbhag said.

Significantly, the broader market benchmark Sensex also reacted positively and surged 77 points to hit an intra-day high of 18,097.22