Rate sensitive shares trade mixed post RBI policy; SBI surges 6%

The Reserve Bank of India's Monetary Policy Committee (RBI MPC) on Thursday decided to keep the repo rate unchanged at 6.5 per cent for the sixth consecutive time.

Shares of rate sensitive sectors like financials including banks, non banking financial companies (NBFCs) and financial institutions, automobiles and real estate trading on a mixed note 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 sixth consecutive time.

At 10:48 am; Nifty Private Bank, Nifty Auto and Nifty Realty index were down up to nearly 1 per cent, as compared to 0.20 per cent decline in the Nifty 50. However, Nifty PSU Bank index hit a new high of 7,008.25 and rallied 4 per cent.

 

Among the public sector banks (PSBs), State Bank of India (SBI) hit a new high of Rs 716.75, surging 6 per cent. Bank of India, Indian Bank, Union Bank of India, Canara Bank, Bank of Baroda and Punjab National Bank were up in the range of 2 per cent to 5 per cent.

Eicher Motors, Maruti Suzuki India, TVS Motor Company, Ashok Leyland, Mahindra & Mahindra and Bharat Forge from automobiles; and Sobha, Brigade Enterprises, Godrej Properties and Macrotech Developers from realty; Axis Bank and ICICI Bank from private sector bank were down up to 3 per cent.

The update is in line with the last policy statement from RBI where the expectation was for the benchmark repo rate to stay unchanged at 6.5 per cent and to have the target inflation rate of 4 per cent, down from the current average of around 5.5 per cent, said Anshul Jain, Managing Director, India & Southeast Asia and Head of APAC Tenant Representation, Cushman & Wakefield.

For the Indian Real estate space, we do not expect today's update to have any material impact on the on-going positive sentiment. However, we hope the interest rates start to drop soon as this will also revive sentiments of affordable homebuyers, Anshul Jain said.

Meanwhile, with today's rally, the stock price of SBI zoomed 11.5 per cent in the past three days, on the back of a strong growth outlook over the medium-term. On Wednesday, the stock price of SBI surpassed its previous high of Rs 660.40 touched on December 20, 2023.

Among PSU banks, SBI has a healthy provision coverage ratio (PCR), adequate capitalisation, a strong liability franchise, and an improving asset quality outlook, making it the best play of the resilient Indian economy, according to analysts. Healthy business growth, along with stable margins and asset quality, is likely to boost profitability, they said.

Meanwhile, asset quality for PSU banks has seen a steady recovery in the past few years toward the end of the corporate NPA cycle and even held up well through the Covid pandemic – contrary to the expectations of many. This recovery cycle began with a declining trend in slippages, which was followed by declining GNPA ratios. We have now seen credit costs also decline as net NPA ratios for most PSU banks have converged to a level of about 1.0 per cent. The steady decline in credit cost has driven a steady improvement in RoE closer to mid-teen levels, according to analysts at Kotak Institutional Equities.