RBI Policy Boost: NBFCs, SMID Banks and Auto Stocks Emerge Top Gainers After Rate Cut, Liquidity Push
RBI’s rate cut and ₹1.45 lakh crore liquidity boost lift NBFCs, SMID banks and auto stocks, with Bajaj Finserv, Shriram Finance and Maruti seen as top gainers.
RBI’s rate cut and liquidity infusion boost financial and auto sector sentiment.
The Reserve Bank of India's surprise 25 bps repo rate cut and a massive ₹1.45 lakh crore liquidity infusion have delivered a major boost to market sentiment, with analysts identifying NBFCs, small- and mid-sized (SMID) banks, and automobile manufacturers as the biggest beneficiaries.
According to Seshadri Sen, Head of Research and Strategist at Emkay Global Financial Services, the policy move directly eases stress in the bond market, improves domestic liquidity, and is expected to support equities in the near term.
Short-Term Bond Rally Favors NBFCs, SMID Banks
The liquidity injection — comprising ₹1 lakh crore OMOs and a $5 billion (₹45,000 crore) USD/INR swap — sparked a sharp rally in sub-5-year bond yields, far outpacing long-term bonds.
This drop in short-end yields effectively reduces borrowing and deposit costs, disproportionately benefitting NBFCs and SMID banks.
NBFCs are set to gain from cheaper funds, while SMID banks will benefit from easier liquidity and higher capital inflows from global investors. Emkay’s top financial picks include Bajaj Finserv, Shriram Finance, and IDFC First Bank.
Credit Growth to Strengthen Further
India’s credit growth has already beaten expectations at 11.3% (mid-November data). With RBI easing concerns around rising loan-to-deposit ratios, Emkay projects credit growth to rise to 13.3% in FY27, driven by recovering retail demand.
However, Sen cautions that the yield curve may remain steep, citing fiscal deficit pressures, weaker GST collections, soft nominal GDP, and limited room for spending cuts.
Auto Sector Set for Extended Upcycle
The automobile sector stands out as a major winner, supported by GST cuts and improved financing conditions. Emkay expects a multi-quarter upcycle in auto demand, with Maruti Suzuki and TVS Motor remaining top picks.
Short-Term Relief, Long-Term Risks
While the RBI measures offer immediate respite to liquidity stresses, macro risks persist. A widening current account deficit (CAD) remains a key concern, and clarity is still missing on the India-US trade deal, which could support external stability.
Equity Outlook: Constructive but Cautious
Despite CAD-linked volatility risks, Emkay maintains a positive view on Indian equities, expecting a consumption-led recovery and a strong earnings rebound from 2HFY26.
The brokerage remains overweight on Consumer Discretionary, Healthcare, and Materials, along with high-growth sectors such as Internet, EMS, aviation, and SMID banks.
