Bank, NBFC stocks cheer RBI’s 50 bps bonanza, but are rate cuts delivering?

The Reserve Bank of India's (RBI) significant 50 basis point repo rate cut on Friday sent a wave of enthusiasm through the markets, particularly benefiting the rate-sensitive banking and NBFC stocks. This positive sentiment was clearly reflected in the Nifty Bank index, which surged to a fresh lifetime high of 56,238.10 during the policy announcement, climbing almost 1% on Friday.

The Nifty Financial Services index also saw a similar upward trajectory, reflecting the broad-based positive impact across the financial sector.

Today’s revision takes the total rate cut to 100 bps, bringing the repo rate to 5.5%


All 12 stocks in the Nifty Bank index were trading in the green, with IDFC First Bank as the top gainer at 2%. The Nifty PSU Bank was also 1% higher around 10:45 am, with Bank of Baroda (BoB) taking the lead of over 2%.

Lower interest rates are expected to bring the cost of credit down, likely enabling higher credit demand. Other rate-sensitive sectors like auto and realty lapped the announcement with glee. The Nifty Auto index shot up by 0.9% around this time despite being down by 0.30% ahead of the policy announcements. Meanwhile, the Nifty Realty index gained more than 2%, extending its gains.

Reacting to the development, Anil Rego, Founder & Fund Manager at Right Horizons PMS, said that the RBI Monetary Policy Committee (MPC) delivered a front-loaded 50 basis point repo rate cut while shifting its policy stance from accommodative to neutral. "This marks a key turning point in India’s monetary approach, signalling a move from active easing to a more balanced, data-dependent stance amid rising global uncertainties and volatile capital flows," he added.

Divam Sharma, Founder & Fund Manager at Green Portfolio PMS, called the magnitude of the cut "significant". "This move is likely to enhance liquidity in the system, making borrowing cheaper and encouraging companies to pursue capital expenditure," he said.

Manju Yagnik, Vice Chairperson of Nahar Group and Senior VP at Maharashtra chapter of NAREDCO, said that the cut is strong and timely amid early signs of demand moderation in the residential sector." Lowering the repo rate to 5.5% will have a cascading effect across the lending ecosystem, bringing home loan interest rates well below 7.75%—a highly encouraging development for both existing and prospective homebuyers," Yagnik added.

Banks/NBFCs stock performance amidst rate cuts since Feb 2025 policy

Since February 7, 2025, the date of the year's inaugural monetary policy announcement by the Indian central bank, an ETMarkets analysis of 95 stocks reveals a significant market response: 63 of these stocks have yielded positive returns, climbing as high as 63%. This policy meeting was particularly noteworthy as it marked the first interest rate cut in five years under the leadership of the new Governor, Sanjay Malhotra.

The top three stocks are NBFCs, followed by a PSU bank. Worth Investment & Trading Co, Aditya Birla Capital, SBFC Finance and Union Bank Of India lead the pack with returns of 63%, 33%, 33% and 28%, respectively.

There are 35 other stocks which have given double-digit returns between 27% and 10% in the same period. Among the most widely tracked stocks are IDBI Bank, RBL Bank, Canara Bank, Bajaj Holdings & Investment, SBI Cards And Payment Services, JIO Financial Services, Shriram Finance, ICICI Bank, Bank of Baroda (BoB), Manappuram Finance, Axis Bank, HDFC Bank and Tata Investment Corporation.

The other 24 stocks have yielded returns in single digits. The Jammu & Kashmir Bank, Tamilnad Mercantile Bank and Arman Financial Services are at the lower end of the ladder with 1-2% returns.

Heavyweights like the State Bank of India (SBI), Kotak Mahindra Bank, Bajaj Finance, Yes Bank, Punjab National Bank (PNB) and IDFC First Bank have yielded between 5% and 9%.

There are laggards too, as 32 stocks have slipped in the red since the first RBI policy announcement in February this year. In this, 17 stocks have seen a double-digit decline between 10% and 52%. The biggest decline was seen in Ashika Credit Capital Finance, followed by Punjab & Sind Bank (PSB) and Paisalo Digital. Both PSB and Ashika have fallen 31% and 29%, respectively.

The stocks with a market capitalisation of Rs 500 crore or more have been taken into account.

The article does not analyse the reasons for losses or gains in specific stocks, but a larger trend in the banks and NBFCs. There could be company-specific issues behind their gains or losses.

Read more: Private lenders disappoint in Q4FY25, but small and PSU banks impress. HDFC Bank, SBI among 16 stocks to buy

For instance, IndusInd Bank's corporate governance issues and losses in its derivative segment triggered a fall in the counter. Since February 7, its fall has been to the tune of 25%.

The Q4FY25 is also a factor in the way stocks have performed. India’s banking sector delivered a mixed performance in Q4FY25, with profit growth diverging sharply across private, public, and small finance banks. While sector heavyweights like HDFC Bank and ICICI Bank posted modest to healthy growth, State Bank of India (SBI), Kotak Mahindra Bank, and Axis Bank reported disappointing numbers. Moreover, a few mid-sized and small banks surprised the Street with explosive profit figures.

Nifty Auto has remained flat in this period, weighed down by Trump tariff uncertainties and mixed earnings.

Read more: Auto Q4FY25 Wrap: Two-wheelers lead PAT surge with TVS Motor, Eicher in front; top 13 counters to buy

The realty sector has fared better with the Nifty Realty index delivering an over 8% uptick.

(Data Inputs by Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)