RBI Policy Update: Rate-Sensitive Sectors See Gains as Nifty Realty Jumps 2%, Nifty Bank and Financial Services Rise 1%

RBI Monetary Policy: Interest Rate-Sensitive Sectors Surge as Repo Rate Remains Unchanged

The Reserve Bank of India's Monetary Policy Committee (MPC) made a unanimous decision on Friday to keep the repo rate unchanged at 5.25%, while retaining its neutral policy stance. This decision sent a positive signal across Dalal Street, with benchmark indices extending gains during the session. The Sensex rose more than 300 points to reclaim the 74,500 mark, while the Nifty 50 traded near the 23,500 level.

Among sectoral indices, Nifty Realty led the rally with gains of nearly 2%, followed by Nifty Financial Services, which advanced 1.3%, and Nifty Bank, which climbed 1%. Public sector lenders also attracted strong buying interest, with the Nifty PSU Bank index rising 1.7%, while the Nifty Private Bank index gained 0.7%.

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Banking stocks witnessed broad-based buying after the policy announcement. Within the Nifty Bank index, IndusInd Bank emerged as the top performer, rising 2%. YES Bank, Punjab National Bank, and Canara Bank gained more than 1.5% each. Bank of Baroda, Union Bank of India, and AU Small Finance Bank also advanced over 1%, while Axis Bank, State Bank of India, IDFC First Bank, and ICICI Bank traded 0.5%-1% higher. HDFC Bank, Federal Bank, and Kotak Mahindra Bank, however, remained in negative territory.

The financial services pack also saw strong participation. Bajaj Finance surged more than 3%, making it the top gainer in the segment. Max Financial, HDFC Life, and REC gained over 2% each, while ICICI Lombard General Insurance, Shriram Finance, Cholamandalam Finance, PFC, SBI Life, and Jio Financial Services rose between 1% and 2%.

Rajesh Palviya, Head of Research at Axis Direct, noted that the RBI's decision is a positive signal for the banking sector, with credit growth having picked up meaningfully and asset quality metrics remaining resilient. However, he added that geopolitical uncertainty and pressure on margins remain key monitorables for the sector.

Palviya also highlighted that larger private sector banks could benefit more if the RBI opts for rate hikes in future meetings due to their higher share of external benchmark-linked lending rate (EBLR) portfolios. He recommended a selective stock selection approach, favoring banks with diversified portfolios, a strong deposit franchise, adequate capitalisation, and attractive valuations.

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Realty stocks delivered the strongest performance among rate-sensitive sectors, with almost every stock in the index trading higher except one. Prestige Estates rallied more than 3.5% to emerge as the top gainer, while Lodha and Phoenix Mills gained over 2.5% each. Godrej Properties and Oberoi Realty added more than 1.5%, while Anant Raj was the only notable laggard, declining over 1.5%.

Shishir Baijal, International Partner, Chairman, and Managing Director, Knight Frank India, noted that a pause in rates would help maintain favourable financing conditions for homebuyers and developers at a time when economic sentiment is being tested by global volatility. Stable borrowing costs are particularly important for sustaining demand in the residential market, where affordability remains a key consideration.

The auto sector also traded higher, although gains were not broad-based. Tube Investments of India rose 1.5%, while Exide Industries, Mahindra & Mahindra, Uno Minda, and Bharat Forge gained more than 0.5% each. On the other hand, Hero MotoCorp, Bosch, and TVS Motor Company declined over 0.5%.