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HDFC Bank, Bajaj Fin: Rate sensitive shares up on repo rate, CRR cut by RBI

Rate sensitive stocks after RBI MPC meeting Shares of rate sensitive sectors, such as financials including banks, non banking financial companies (NBFCs), housing finance companies; automobiles; and real estate rallied up to 7 per cent on the bourses in Friday's intraday trade after the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) reduced the benchmark repo rate by 50 basis points (bps) to 5.50 per cent. The cut in the repo rate, which is the rate at which central banks lend to commercial banks, usually against government securities, was accompanies by a 100-bps reduction in cash reserve ratio (CRR). Besides, the Standing Deposit Facility (SDF) rate is now reduced to 5.25 per cent, while the Marginal Standing Facility (MSF) rate stands at 5.75 per cent. The RBI has shifted its policy stance from 'accommodative' to 'neutral'. The RBI MPC announced a reduction in the CRR by 1 percentage point to 3 per cent of net demand and time liabilities (NDTL) in a staggered manner during the course of the year. The CRR is the percentage of a bank's total deposits that it must keep as reserves in cash with the central bank, ensuring liquidity and controlling inflation. "This reduction will be carried out in four equal tranches of 25 bps each with effect from the fortnights beginning September 6, October 4, November 1 and November 29, 2025. The cut in CRR would release primary liquidity of about ₹2.5 trillion to the banking system by December 2025. Besides providing durable liquidity, it will reduce the cost of funding of the banks, thereby helping in monetary policy transmission to the credit market," RBI Governor Sanjay Malhotra said in a statement. At 10:37 AM, the Nifty Bank, Nifty Financial Services, Nifty PSU Bank, Nifty Private Bank index, Nifty Auto, and Nifty Realty index were up in the range of 1 per cent to 2 per cent. In comparison, the Nifty 50 was up 0.47 per cent at 24,867.20. Share prices of Godrej Properties, DLF, Ajmera Realty & Infra India, Kolte-Patil Developers, Suntech Realty and Signatureglobal (India), from the real estate sector, were up in the range of 3 per cent to 7 per cent. Further, shares of Mahindra & Mahindra Financial Services, Equitas Small Finance Bank, Ujjivan Small Finance Bank, Fino Payments Bank, Bajaj Finance, Shriram Finance, IDFC First Bank, RBL Bank and Axis Bank, from the financials, up between 2 per cent and 4 per cent. Ashok Leyland, Minda Corp, Maruti Suzuki India, Hero MotoCorp, TVS Motor Company, Uno Minda and Bajaj Auto from the automobiles and its related companies are up in the range of 1 per cent to 3 per cent. "The higher-than-expected 50bp rate cut decision by the MPC, though positive for growth is slightly negative from the market perspective for the near-term. This big rate cut is, as the RBI Governor remarked, front-loading of the rate cut. The change in monetary stance from accommodative to neutral also indicates that more rate cuts are unlikely unless the situation warrants. This big rate cut will impact the margins of the banks and, therefore, bank stocks will be under pressure in the near-term. However, the credit growth that this rate cut will hopefully stimulate will compensate for the dip in margins" said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments. InCred Equities view on Banks The brokerage firm believes that impending repo rate cuts will further deteriorate core profitability at State-Owned Enterprises (SOE) banks. Large private banks are better placed to manage margins in this repo rate downcycle vs. SOE banks, given a) relatively better starting point of margins, b) ability to drive the mix shift towards higher-yielding products, c) lagged repo rate transmission on linked loans, and d) the benefit of savings deposit rate cut of 25bp taken so far vs. limited savings account or SA rate cuts seen at SOE banks. Among large private banks, the brokerage firm has an ADD rating on Axis Bank, HDFC Bank and ICICI Bank. "We believe HDFC Bank can outperform ICICI Bank over the next few years with broadly similar earnings growth trajectory and healthy deposit growth delivery. Among SOE banks, analysts said they would prefer stocks with healthy on-balance sheet liquidity and levers to offset margin compression at reasonable valuations. The brokerage firm has an ADD rating on Punjab National Bank (PNB) & Canara Bank. State Bank of India (SBI) & Bank of Baroda (BoB) are quality franchises among SOE banks, but their valuations made us to assign a HOLD rating to them," InCred Equities said in a banking sector update. Kotak Institutional Equities' view on Real Estate sector Residential real estate closed FY2025 with 1 billion sq. ft. of sales, down 3 per cent year-on-year (Y-o-Y), largely impacted by Hyderabad, which saw a 33 per cent (Y-o-Y) decline. The MMR (Mumbai Metropolitan Region) and Bengaluru were soft on volumes on account of slower launches, while the NCR (National Capital Region) continued its strong showing, with 47 per cent Y-o-Y growth in volume sales. Price trends remained strong across markets, aiding 10 per cent Y-o-Y growth in sales value. 'Valuations for most residential real estate stocks stand at 7-10x adjusted EV/ Ebitda (FY2026E) post some recovery in the stock prices. H2FY25 saw an improvement in sales following a weaker H1FY25; developers expect the momentum to continue. They have guided for double-digit pre-sales growth (20 per cent Y-o-Y in FY2026E for our coverage), aided by industry growth and market share gains,' Kotak Institutional Equities said in a sector report. The combined launch pipeline at 140 million sq. ft (+30 per cent Y-o-Y) has a potential GDV of ₹1.7 trillion, which should also support the momentum. Net debt for the listed developers has come off significantly over the past few years, aided by healthy cash generation as well as equity raises. Strong balance sheets would allow the companies to invest in new land parcels, aiding future growth. The brokerage firm said they remain constructive and prefer DLF, Brigade and Prestige at the current price points.