Rate sensitive shares trade firm as RBI keeps repo rate unchanged at 6.5%

Shares of rate sensitive sectors such as financials, realty and automobiles are trading firm and outperforming the benchmark index after the Reserve Bank of India's Monetary Policy Committee (RBI MPC) decided to keep the repo rate unchanged at 6.5 per cent for the seventh consecutive time, Governor Shaktikanta Das announced on Friday.

The RBI MPC has also decided to keep its stance of "withdrawal of accommodation" unchanged with a majority of 5-1. RBI Governor Das said this was to ensure that inflation aligned with the four per cent target while aligning with growth.

At 10:39 am; the Nifty Bank, Nifty Financial Services, Nifty PSU Bank, Nifty Private Bank and Nifty Realty index are trading in green and quoting higher by up to 1.7 per cent. Nifty Auto index was down 0.12 per cent. In comparison, the Nifty 50 index was trading 0.10 per cent lower at 22,493.

Among the realty, Oberoi Realty, Mahindra Lifespace Developers, Godrej Properties, DLF and Phoenix Mills are up in the range of 2 per cent to 5 per cent on the National Stock Exchange (NSE).

Punjab and Sind Bank, UCO Bank, Canara Bank, Indian Overseas Bank, Union Bank of India, Punjab National Bank, Bank of India and Central Bank of India from the PSU banks are trading higher between 1 per cent and 3 per cent. However, Bajaj Auto, TVS Motor Company, Maruti Suzuki India and Ashok Leyland from automobiles are down nearly 1 per cent.

Meanwhile, RBI Governor Shaktikanta Das revised the real gross domestic product (GDP) growth for the financial year 2023-24 (FY24) to 7.6 per cent. Earlier GDP projection for FY24 was 7.3 per cent. On India's economy, the RBI has projected the CPI inflation at 4.5 per cent for the financial year 2024-2025 (FY25), assuming normal monsoon. RBI MPC wants the elephant (inflation) to stay in the forest (lower) for a long period of time.

“Strong growth projections for FY25, give flexibility to RBI to stay on hold till the time we actually witness global monetary easing. Highlighting that the last mile of inflation remains challenging, RBI MPC decided to keep rates unchanged and maintained a “withdrawal of accommodation” stance,” said Deepak Agrawal, CIO- Debt, Kotak Mahindra AMC.

The AMC continues to expect a rate cut in the US and RBI is also likely to change MPC stance and cut rates in the second half of CY2024. RBI will continue to manage liquidity such that repo rates are the operation rate, said Agrawal.

"The monetary policy which has come on expected lines with no change in policy rates and stance is, however, very optimistic about the current financial year,” said Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Emphasising that “CPI inflation is in declining trajectory and GDP growth is buoyant” the Governor has projected CPI inflation of 4.5 per cent and GDP growth of 7 per cent for FY 25.

This optimism augurs well for the stock market. Governor’s remark that “ private capex cycle is getting broad-based and capacity utilisation is improving “ is good news for the capital goods segment, said Dr. V K Vijaykumar.