Rate sensitive shares mostly higher as RBI holds repo rate; Auto pack lags

Barring auto stocks, shares of rate sensitive sectors including banks, non banking financial companies (NBFCs), housing finance companies and realty companies were uniformly higher on Friday after the Reserve Bank of India kept the benchmark repo rate unchanged for the fifth time. 

The RBI held the repo rate steady at 6.5 per cent and raised the FY24 GDP forecast to 7 per cent from 6.5 per cent. The MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth.

At 10:48 AM; Nifty Bank, Nifty Financial Services, Nifty PSU Bank, Nifty Private Bank and Nifty Realty index were trading up in the range of 0.55 per cent to 1.1 per cent. In comparison, the Nifty 50 was up 0.44 per cent at 20,994. However, the Nifty Auto index was down 0.12 per cent.

Among the individual stocks, Bank of Baroda, IDFC First Bank, HDFC Bank and IndusInd Bank, LIC Housing Finance, REC and, Power Finance Corporation (PFC) from the financials and Prestige Estates Projects, Macrotech Developers (Lodha), DLF and Sobha from the real estate pack were up 1-4 per cent.

However, TVS Motor Company, Ashok Leyland, Mahindra & Mahindra (M&M) and Hero MotoCorp from the automobiles were down nearly 1 per cent on the National Stock Exchange (NSE).

"Continued strengthening of manufacturing activity, buoyancy in construction, and gradual recovery in the rural sector are expected to brighten the prospects of household consumption. Healthy balance sheets of banks and corporates, supply chain normalisation, improving business optimism and rise in public and private capex should bolster investment going forward", RBI said in the policy statement.

With improvement in exports, the drag from external demand is expected to moderate. Headwinds from the geopolitical turmoil, volatility in international financial markets and geoeconomic fragmentation pose risks to the outlook, RBI said.

Following the RBI action, the Indian real estate industry and the economy at large are expected to benefit from a rate cut given that current macro-economic parameters are favourable and the rate has been maintained at 6.5 per cent for the last 3 quarters.

The policy will benefit Indian Real Estate and its ancillary industries as it is expected to maintain the ongoing momentum in housing registrations in the final month of the year, said Anshul Jain, Managing Director-India & Southeast Asia and Head of APAC Tenant Representation, Cushman & Wakefield. 

From a borrowing cost perspective, this move also ensures that homebuyers’ EMIs don’t increase whereas for developers, it doesn’t increase their financial burden owing to the consistent rate of cost of capital, added Jain.

Meawnhile, a rate cut would have been more ideal, giving a fillip to the industry, said another expert. 

"This move will keep home loan rates and cost of buying a house on the higher side for consumers and we hope that it does not disrupt homebuyers’ sentiments. With inflation relatively in check, economy growing at a faster than expected pace, reasonably good monsoon, RBI could have opted for a rate cut that would have provided the ideal opportunity to accelerate housing momentum and overall consumer spending," said Boman Irani, President, CREDAI National.