Rate-sensitive sectors trade mixed as RBI cuts CRR, maintains repo rate. What should investors do? | Stock Market News

RBI Monetary Policy: Rate-sensitive sectors were trading on a mixed note on Friday, December 6 following the Reserve Bank of India’s (RBI) decision to keep the repo rate unchanged at 6.5 per cent for the eleventh consecutive time and policy stance as ‘neutral’. Meanwhile, the MPC cut the cash reserve ratio (CRR) by 50 bps to 4 per cent, which kept the sentiment positive.

Alongside the rate decision, the central bank raised its inflation projection for FY25 to 4.8 per cent (from 4.5 per cent) and cut the real GDP growth forecast to 6.6 per cent for the fiscal year from 7.2 per cent earlier.

Following the policy announcement, the Indian benchmark index Sensex initially fell 260 points to its day’s low of 81,506.19 but later jumped 420 points from its day’s low to its intra-day high of 81,925.91. Nifty, on the other hand, also shed 88 points to its day’s low of 24,620.5 just after the announcement but later rose over 130 points to the day’s high of 24,751.05.

Broader market indices, including midcap and smallcap stocks, outperformed the benchmarks, gaining 0.4 per cent each.

Banks and Financial Services Shine

The rate-sensitive sectors also reacted strongly to the RBI’s policy announcement. Nifty PSU Bank surged 1.3 per cent, while Nifty Auto advanced 0.74 per cent. Nifty Bank, Nifty Private Bank, and Nifty Financial Services also gained more than 0.4 per cent each. Only Nifty Realty was in the red, down 0.14 per cent.

Within the Nifty Bank index, most stocks traded in the green. Bank of Baroda and Canara Bank led the gains, rising over 2 per cent each. Other major gainers included Axis Bank, Punjab National Bank, SBI, and IDFC First Bank, each posting gains of over 0.5 per cent. Federal Bank, AU Small Finance Bank and HDFC Bank were the only three stocks in the red.

In the financial services space, REC led the rally with a 3 per cent increase. MCX and PFC followed closely, both rising over 1.5 per cent each. LIC Housing Finance, Muthoot Finance, ICICI General Insurance, and ICICI Prudential also posted gains of over 0.5 per cent.

“Monetary policy has delivered exactly what the economy and markets need in the present context. The Governor’s emphasis on price stability is appropriate given the elevated level of inflation. The decision to cut the CRR by 50bp facilitating the injection of ₹1.16 trillion of liquidity into the system will ease the liquidity constraints and more importantly reduce the banks’ cost of funds. From the market perspective, this is an excellent policy response. Banking stocks will remain resilient,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Strong Performance By Auto; Realty Lags

Motherson led the charge within the auto pack, with over 4 per cent gains. Bajaj Auto, Bosch, Exide Industries, and Eicher Motors followed closely, adding over 1 per cent each. MRF, M&M, and TVS Motor also rose by over 0.4 per cent in intra-day trading.

In the realty sector, Lodha, Brigade Enterprises, and Mahindra Life emerged as top gainers, rallying over 0.5 per cent each, while Phoenix, Sobha, and Godrej Properties, shed more than 1 per cent.

“The RBI decision to keep the repo rate unchanged is on the expected lines providing much-needed stability to the housing market. The residential real estate sector continues to show robust performance in the existing interest rate environment. While a rate cut would have been favourable for the real estate sector, unchanged home loan rates will also help sustain buyer interest and preserve the positive sales momentum that we have seen in the recent past, enabling more homebuyers to realize their dreams. Going forward, the RBI should consider reducing rates as it will further boost investment in the real estate sector,” said Ramani Sastri, Chairman & MD, Sterling Developers

What Should Investors Do?

The Reserve Bank of India’s neutral stance brings much-needed stability for investors, said Anirudh Garg, Partner and Fund Manager, Invasset PMS. According to Garg, this is an opportune time for fund managers to prioritise sectors aligned with robust domestic demand and India’s long-term growth outlook. 

“Despite global uncertainties, India’s strong macroeconomic fundamentals and consistent policy approach provide a solid foundation for navigating current market dynamics,” he added. 

Additionally, the CRR reduction injecting ₹1.16 lakh crore into the banking system is seen by him as a positive step to enhance liquidity and drive credit growth, particularly benefiting infrastructure and housing.

Divam Sharma, Founder and Fund Manager, Green Portfolio remains optimistic about market performance in the near term despite challenges in Foreign Portfolio Investor (FPI) inflows. He emphasised the importance of measures to boost FPI flows, especially from Non-Resident Indians (NRIs), to strengthen market momentum. Sharma believes that as the economic transition in the U.S. stabilises, there will likely be an increase in FPI inflows into Indian markets, providing additional support to growth.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.