Realty, PSU Bank index down 2%; Auto outperforms after RBI cuts repo rate

Mahindra & Mahindra, TVS Motor Company, Bajaj Auto and Maruti Suzuki India from the auto pack are trading higher by up to 1 per cent in a weak market

Shares of rate sensitive sectors like automobiles, real estate and financials, including banks, non banking financial companies (NBFCs) and housing finance companies (HFCs) are trading mixed after the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) unanimously decided to reduce the repo rate by 25 basis points to 6 per cent.

 

The standing deposit facility (SDF) rate has been adjusted to 5.75 per cent from 6 per cent, and the marginal standing facility (MSF) rate to 6.25 per cent from 6.5 per cent, Governor Sanjay Malhotra announced on Wednesday.

 

At 10:49 am; the Nifty Realty and Nifty PSU Bank index slipped 2 per cent. Nifty Private Bank index was down 0.58 per cent, as compared to 0.61 per cent decline in the Nifty 50. However, the Nifty Auto index was trading higher by 0.3 per cent.

 

Oberoi Realty, Anant Raj and Sobha from the realty pack, and Bank of India, Union Bank of India and Indian Bank among public sector banks are down in the range of 2 per cent to 4 per cent. However, Mahindra & Mahindra, TVS Motor Company, Bajaj Auto and Maruti Suzuki India from the auto cohort are trading higher by up to 1 per cent.

 

Auto shares outperformed the market after the RBI said core inflation remained subdued and fuel deflation continued. Inflationary pressures were expected to moderate in the near term, due to good kharif production, easing in vegetable prices and favourable Rabi crop prospects while continued uncertainty in global financial markets, volatility in energy prices and adverse weather events posed upside risks. Assuming a normal monsoon next year, CPI inflation for 2025-26 is projected at 4.2 per cent.   ALSO READ | Manappuram, Muthoot slip up to 10% as RBI to review gold loan regulations

 

The MPC noted that inflation is on a declining trajectory largely due to favourable outlook on food prices and the impact of past monetary policy measures and is further expected to moderate in 2025-26, gradually aligning with the target.

 

“The policy announcements come against the backdrop of increased volatility across asset classes, fear of a sharp global slowdown due to tariff shock. We believe the policy announcements were balanced and prudent, especially given the current uncertainties. The change in stance highlights the MPC’s resolve to support growth, as inflation risks have come down while risks to growth have increased. On the liquidity front, we expect the RBI to remain proactive and ensure sufficient liquidity conditions in the banking system,” said Sachin Bajaj, executive vice president and chief investment officer, Axis Max Life Insurance.  Going forward, Bajaj believes that the global growth outlook is expected to be highly uncertain and may have potential negative implications for our growth.  Inflation is expected to be within MPC’s target of 4 per cent due to lower crude, food prices. He expects the RBI to continue to provide the required support to growth through various measures.  Meanwhile, the recent tariff announcements by the US administration have heightened policy uncertainty posing new headwinds for global growth and inflation. While India cannot remain immune to these developments, the progress achieved on the disinflation front gives headroom to monetary policy to focus on balancing the growth inflation outcome, RBI said in its Monetary Policy Report April 2025.  ALSO READ | FMCG stocks gain as RBI cuts FY26 inflation est; GCPL, HUL rise up to 2%

 

However, domestic economic activity is on a recovery path and is expected to remain resilient backed by consumption demand. It needs to be recognised that India’s forte is its high growth potential and robust macroeconomic fundamentals. The government's push for consumption and capex, resilient services sector, robust outlook of agricultural sector aided by strong corporate and bank balance sheets provide impetus to the growth momentum, going forward, the report noted.

 

Meanwhile, since FY22, most Grade-A listed real estate developers have either achieved or exceeded their stated guidance, but the impact of a sharp base effect and a moderation in pricing growth at the industry level can impact future prospects of the sector, according to analysts at JM Financial Institutional Securities. The brokerage firm in Q4FY25 result preview said that they will watch out for any commentary on sustainability of growth, as it remains a key monitorable and will be critical in reviving investors’ interest.