Rate-sensitive stocks advance
Rate-sensitive stocks advance
Rate-sensitive bank, auto and realty stocks ended higher on Friday after the Reserve Bank of India (RBI) cut key benchmark interest rate for the first time in six months and vowed to provide Rs 1 lakh crore liquidity boost to the banking sector to support a "goldilocks" economy in the face of high US tariffs.
"Rate-sensitive sectors such as auto, real estate, and NBFCs are leading the gains due to cost reduction. While private banks have also gained on expectation of treasury profits, concerns around net interest margins (NIM) have limited their upside," Vinod Nair, Head of Research at Geojit Investments Limited, said.
Shares of State Bank of India rallied 2.46 per cent, Bank of Baroda climbed 1.56 per cent, IDFC First Bank went up by 1.18 per cent, Kotak Mahindra Bank (0.89 per cent), IndusInd Bank (0.77 per cent), HDFC Bank (0.59 per cent), ICICI Bank (0.40 per cent), Federal Bank (0.27 per cent) and Axis Bank (0.20 per cent) on the BSE. The BSE Bankex index ended 0.86 per cent higher at 67,018.67.
Among auto stocks, Maruti Suzuki India went up by 1.75 per cent, Eicher Motors (1.54 per cent), Mahindra & Mahindra (1.23 per cent), Bharat Forge (0.83 per cent), TVS Motor Company (0.48 per cent), Ashok Leyland (0.41 per cent), Bajaj Auto (0.22 per cent), and Hero MotoCorp (0.17 per cent). The BSE auto index ended 0.57 per cent higher at 62,112.92.
From the realty space, Prestige Estates Projects edged higher by 1.99 per cent, DLF (1.50 per cent), Signatureglobal (India) Ltd (0.72 per cent), Lodha Developers (0.30 per cent), Godrej Properties (0.10 per cent) and Sobha Ltd (0.05 per cent). The realty index climbed 0.34 per cent to 6,936.09.
The six-member monetary policy committee, led by RBI Governor Sanjay Malhotra, voted unanimously to lower the repurchase or repo rate by 25 basis points to 5.25 per cent and retained a neutral stance, which gave room for further rate cuts.
A cut in the repo rate will lead to lower borrowing costs for individuals as well as corporations because it reduces the interest banks pay to borrow from the RBI. With cheaper funding, banks can lower lending rates such as MCLR and base rates, making home, auto, and business loans more affordable. The RBI also reiterated its commitment to providing adequate liquidity to the banking system as it announced its intention to conduct open market purchases of government bonds up to Rs 1 lakh crore in two tranches of Rs 50,000 crore each on 11th and 18th December and a buy-sell swap of USD 5 billion on 16th December.
Both measures will add durable liquidity at a time when banks face seasonal liquidity pressures. The RBI lowered its inflation forecast for the fiscal through March to 2 per cent from 2.6 per cent, while raising its GDP growth projection to 7.3 per cent, from the previous estimate of 6.8 per cent.
