Most rate-sensitive stocks end lower after RBI's repo status quo

Experts believe in the near-term, rate-sensitive stocks will remain under pressure as rate cut was highly expected

Shares of interest rate-sensitive sectors such as banking, real estate and automobiles ended mixed on Wednesday after the Reserve Bank of India (RBI) Governor Urjit Patel-led Monetary Policy Committee (MPC) maintained status quo on the rate at which it lends to banks, known as repo rate, at 6.25%. 

The six-member MPC committee unanimously decided to keep the policy rate unchanged considering the “heightened uncertainty” of volatility related to interest rate hike in US and the local demonetisation drive. There were hopes that a rate cut could bring some relief to consumption-led sectors such as real estate and automobile, which have been hit hard by the government’s recent demonetisation move.

"In the near-term, we believe rate-sensitive stocks will remain under pressure because rate cut was highly expected, which would have benefited these stocks in terms of interest savings and uptick in loan growth," said Siddharth Purohit, senior equity research analyst-banking at Angel Broking.  

Bank Nifty pared all its intraday gains to end the day 1% lower at 18,234.15, led by losses in Bank of Baroda (3.20%), Bank of India (2.22%), Axis Bank (1.96%) and Punjab National Bank (1.79%).

“We had positive view on the banking space, but we are now in the process of reviewing banking stocks. We believe finance companies on retail side such as LIC Housing Finance will perform better than some PSU bank stocks," Purohit said.

Phoenix, Housing Development & Infrastructure (HDIL) , Indiabulls Real Estate, DLF and Godrej Properties from the real estate sector were down in the range of 1.62%-4.42% on the NSE. However, Prestige Estates, Unitech, Oberoi Realty, Sobha and Delta Corp gained in the range of 1%-3%.

AK Prabhakar, head of research at IDBI Capital is not gung-ho over realty sector. "Being an aggressive Prime Minister that Narendra Modi is, after black money he will go on to the next step to tackle benami properties. However, companies like Sobha and Oberoi Realty, which deal in cheques look safe,” he said. 

The Nifty Auto index settled the day 0.44% higher at 9,053. Ashok Leyland, Bosch, Bajaj Auto, Amara Raja Batteries and Exide Industries shed in the range of 0.73% to 1.73%, while Eicher Motors, Bharat Forge, TVS Motors, Hero MotoCorp and Tata Motors settled the day higher on NSE.

“As far as auto pack is concerned, November auto sales numbers have not reflected true picture of demonetisation impact, and the real impact will be visible by January or February, Prabhakar said adding Eicher Motors and Maruti Suzuki are good buys at lower levels.

Since November 8, post demonetization, most of these sectors – Nifty Realty (down 16%), Nifty Auto (11%) and Nifty Bank (5.5%) had underperformed the market by falling more than 5% each, against 4.7% decline in the benchmark index till yesterday. Nifty PSU Bank index, however, buck the trend and was up 2.9% during the same period.