Rate-sensitive stocks fall up to 4% after RBI holds rates, maintains neutral policy stance

Economic Times

4 days ago

Rate-sensitive stocks, including banking, non-banking financial services, and realty, edged lower on Wednesday after the Reserve Bank of India (RBI) kept the benchmark repo rate steady at 5.5% and reaffirmed its 'neutral' policy stance, in line with expectations. The central bank also signaled continued resilience in growth and easing price pressures through revised inflation projections.
ADVERTISEMENT The Bank Nifty fell 0.2% following the RBI's policy announcement, while the Nifty Realty index dropped 2.3%. Broader financials also traded weak, with the Nifty PSU Bank index and the Nifty Financial Services index down 0.2% each. The Nifty Financial Services Ex-Bank index underperformed, slipping nearly 1%.
Among rate-sensitive sectors, real estate bore the brunt of the market reaction. Prestige Estates, DLF, and Godrej Properties fell between 2% and 4%. Banking and NBFC stocks also saw selling pressure, with IndusInd Bank, AU Small Finance Bank, and IDFC First Bank declining in the range of 1% to 2%.
'The MPC's unanimous decision to keep the repo rate unchanged at 5.5%, even while reducing the CPI inflation forecast to 3.1% for FY26 from 3.7% earlier, can be described as a dovish pause,' said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.He added that the downward-trending inflation, supported by a 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 cuts' is appropriate under the current circumstances. This policy of a dovish pause while maintaining a neutral stance is positive for the banking and other rate-sensitive sectors,' he said.
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'Domestic growth is holding up and is evolving along the lines of our assessment, though some high-frequency indicators showed mixed signals in May and June,' said RBI Governor Sanjay Malhotra.'Over the medium term, the Indian economy holds bright prospects in the changing world order, drawing on its inherent strength, robust fundamentals, and comfortable buffers.'
ADVERTISEMENT The central bank retained its real GDP growth forecast for FY26 at 6.5%, with quarterly estimates unchanged at 6.5% in Q1, 6.7% in Q2, 6.6% in Q3, and 6.3% in Q4.On inflation, the RBI revised its full-year CPI forecast to 3.1%, down from 3.7% previously. The Q2 FY26 estimate was sharply cut to 2.1% from 3.4%, while Q3 was lowered to 3.1% from 3.9%. The Q4 forecast remains at 4.4%, with Q1 FY27 inflation projected at 4.9%.
ADVERTISEMENT 'Retail inflation is likely to see an uptick in the last quarter of FY2026,' Malhotra noted, though he added that 'core inflation is likely to remain steady around the 4% mark.'After slashing rates by 50 basis points in the previous meeting, the RBI's decision to pause while maintaining a neutral stance was broadly anticipated by the market. The central bank has now reduced the benchmark rate by a cumulative 100 basis points over the past three meetings, front-loading its easing measures for the current fiscal year.Heading into the policy, many analysts had predicted a 'dovish pause', expecting the RBI to lower its CPI projections for the year. With growth remaining steady and inflationary pressures cooling, most economists now expect the central bank to hold its stance steady in the near term.
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Also read | RBI MPC keeps repo rate unchanged at 5.5% amid Trump tariff threats; reveals GDP, inflation targets for Q1 FY27
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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