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

At 10:40 am; Nifty Bank, Nifty Financial Services, Nifty Private Bank, Nifty PSU Bank, Nifty Auto and Nifty Realty index were up in the range of 0.60% to 1.07%.

Shares of rate sensitive sectors such as - financials including banks, non-banking finance companies (NBFCs) and housing finance companies (HFs), automobiles and real estate were trading firm on Friday after the Reserve Bank of India's Monetary Policy Committee (MPC) decided to keep the repo rate unchanged at 6.5 per cent for the eighth consecutive time.

To align the inflation with RBI's target, MPC decided to continue the 'withdrawal of accommodation' stance. On growth, the RBI Governor Shaktikanta Das increased the projection of real GDP growth for FY25 from 7 per cent in the April meeting to 7.2 per cent.

Moreover, the standing deposit facility (SDF) rate remains at 6.25 per cent, and the marginal standing facility (MSF) rate and the bank rate at 6.75 per cent. RBI Governor Shaktikanta Das mentioned that the food inflation remains elevated as deflation in fuel prices is still ongoing.

The RBI’s policy update provides a stable and supportive outlook for MSMEs and NBFCs. By maintaining the repo rate and projecting higher growth, the RBI reinforces its commitment to fostering a balanced and resilient economic environment. This sets a strong foundation for continued economic development and financial stability, crucial for the growth and success of MSMEs and the broader financial sector. - Ritesh Jain, Co-Founder of Flexiloans.com.

At 10:40 am; Nifty Bank, Nifty Financial Services, Nifty Private Bank, Nifty PSU Bank, Nifty Auto and Nifty Realty index were up in the range of 0.60 per cent to 1.07 per cent, in line with Nifty 50, which was up 1.02 per cent.

Among individual stocks, Tata Motors, Ashok Leyland, Apollo Tyres and Balkrishna Industries from auto were up between 1 per cent and 3 per cent. Sobha, Brigade Enterprises, Sunteck Realty and Macrotech Developers (Lodha) traded higher in the range of 2 per cent to 7 per cent. Union Bank of India, Bank of India, Federal Bank, Bandhan Bank and RBL Bank from the banking space quoted higher by up to 3 per cent.

Looking ahead, the forecast of above normal south-west monsoon by the India Meteorological Department (IMD) is expected to boost kharif production and replenish the reservoir levels. Strengthening agricultural sector activity is expected to boost rural consumption. On the other hand, sustained buoyancy in services activity should continue to support urban consumption. The healthy balance sheets of banks and corporates; government’s continued thrust on capex; high capacity utilisation; and business optimism augur well for investment activity, the RBI’s Governor said in statement.

India’s rapid economic expansion will give the central bank room to focus on price stability. Growth topped 8 per cent in the fiscal year that ended in March, while inflation was at 4.83 per cent in April, above the central bank’s 4 per cent target. The RBI raised its growth projection for the fiscal year through March 2025 to 7.2 per cent from 7 per cent and maintained its inflation forecast at 4.5 per cent, said Amit Goel, Co-Founder & Chief Global Strategist, Pace 360.

Goel does not expect rate cuts until the final quarter of this year and predict the RBI will likely only move after the US Federal Reserve pivots.