Should you buy, sell, hold interest rate sensitive stocks post RBI policy?

Nifty PSU Bank, Nifty Private Bank and Nifty Bank index have outperformed the market,down in the range of 0.09 per cent to 0.25 per cent.

Shares of rate sensitive sectors traded weak in intrady deals on Wednesday with Nifty Realty and Nifty Auto index falling by up to 2 per cent. The fall came on the back of the Monetary Policy Committee (MPC) opting to leave the repo rate unchanged at 5.5 per cent. The committee also retained its ‘neutral’ policy stance.

 

At 10:46 AM; Nifty Auto and Nifty Realty indices were down 0.72 per cent and 2.2 per cent, respectively. That said, Nifty PSU Bank, Nifty Private Bank and Nifty Bank index have outperformed the market, were down in the range of 0.09 per cent to 0.25 per cent. In comparison, Nifty 50 was down 0.35 per cent at 24,564.

 

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DLF, Prestige Estates Projects, Godrej Properties, Anant Raj, Lodha Developers, Brigade Enterprises and Oberoi Realty were down in the range of 1 per cent to 3 per cent on the National Stock Exchange (NSE) in intra-day trade. Bosch, Balkrishna Industries, Hero MotoCorp, Exide Industries, Ashok Leyland and Tube Investment of India from the Nifty Auto index were down between 1 per cent and 5 per cent.

 

  Should you buy, sell, hold rate sensitive stocks?  Analysts believe the interest rate sensitive stocks are seeing a knee-jerk reaction to the MPC's move. Investors, they suggest, can look to buy these stocks on a decline from a long-term perspective, but should ensure valuation comfort and visibility in earnings before putting in their hard-earned money.  "There is no need to panic. A pause in the rate cutting cycle was expected this time around. The RBI will resume the rate cutting cycle soon. The monsoon is on track, and the tariff war is also likely to be deflationary. All these should see the RBI cut rates soon. I expect 100 basis points (bps) of cut in interest rates before calendar year 2025 runs out," said G Chokkalingam, founder and head of research at Equinomics Research.  Among the lot, he prefers public sector (PSU) bank stocks that have a stronger CASA (current account, savings account) compared to their private counterparts. "As regards real estate stocks, a few are still trading at very high price earnings (PE) multiples. One should remain selective here," he advises.  Monetary policy statement  Meanwhile, The Reserve Bank of India (RBI) in Monetary Policy statement said that the MPC noted that the inflation outlook in the near term has become more benign than anticipated earlier, and the average CPI inflation this year is expected to remain significantly below the target. Growth has held up well with some pick-up expected in the coming festive season and is evolving in line with MPC’s assessment of 6.5 per cent for 2025-26.

 

The global environment continues to be challenging. Although financial market volatility and geopolitical uncertainties have abated somewhat from their peaks in recent months, trade negotiation challenges continue to linger, MPC said in statement.

 

Domestic growth remains resilient and is broadly evolving along the lines of MPC’s assessment. Private consumption, aided by rural demand, and fixed investment, supported by buoyant government capex, continue to boost economic activity. CLICK HERE FOR Monetary Policy Statement, 2025-26

 

The MPC’s unanimous decision to keep the repo rate unchanged at 5.5 per cent even while reducing the CPI inflation forecast to 3.1 per cent for FY26 from 3.7 per cent earlier can be described as a ‘dowish pause.’ Downtrending inflating in the backdrop of good monsoon and Kharif sowing will keep inflation well anchored enabling the MPC to go for another rate cut in this rate cutting cycle. 

 

The RBI Governor’s view that “we are waiting for the transmission of front-loaded rate cut” is the right view under the present circumstances. This policy of dovish pause while continuing with the neutral policy stance is good for the banking and other rate sensitive sectors, said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Investments.

 

“Maintaining a ‘neutral’ stance signals optionality rather than indecision as the central bank is keeping policy nimble in case trade shocks escalate or if financial conditions tighten globally. Any fresh easing will now hinge not just on data but on the balance of risks between global trade retrenchment, domestic demand softening, and the rupee’s trajectory. In this context, today’s decision preserves both credibility and flexibility while acknowledging that we are in an uncertain world where macro policy must avoid both premature celebration and pre-emptive exhaustion,” said Arsh Mogre, Economist, PL Capital.