RBI rate cut: What it means for banks, NBFCs, auto and real estate stocks

While Reserve Bank of India's new Governor Sanjay Malhotra cut interest rates by 25 basis points, as expected, on Friday to deliver a first rate cut after 5 years, the market was left a tad disappointed as the RBI chose to retain its neutral stance and did not announce any specific new measures on liquidity injection.

While the rate cut is positive for equities, the RBI policy failed to provide any directional trigger to the stock market, which has been under pressure amid FII outflows, the Trump tariff war, and Q3 earnings proving to be insufficient to support valuations.

From a market perspective, Wright Research PMS Founder Sonam Srivastava said, this rate cut is expected to have a positive impact on rate-sensitive sectors.


"Banking and financial stocks may see increased credit demand, improving net interest margins in the near term. The real estate sector stands to benefit as lower interest rates on home loans could boost housing demand. Similarly, consumer durables and auto segments may experience higher sales, particularly in the premium category, as financing costs decline," she said.

The rate cut is being seen as a positive for lenders having a higher share of fixed-rate portfolios, especially credit card issuers, vehicle financiers and gold financiers.

"On the other hand, banks with a higher share of floating-rate loans would continue to face near-term headwinds on margins. We would remain watchful of asset quality trends for banks, especially those with meaningful exposure to unsecured lending, wherein recovery is still a couple of quarters away," Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS, said.

Kulkarni prefers Bajaj Finance, Cholamandalam Investment & Finance and Shriram Finance as key beneficiaries in the rate cut cycle.

Also read | Rate-sensitive auto, realty stocks surge up to 3%, banks decline after RBI MPC cuts repo rate

However, despite the rate cut, D-Street investors aren’t exactly cheering because worries about global trade, fiscal challenges, and whether this cut will actually boost growth are keeping the excitement in check, analysts said.

The bond market was disappointed as the 10-year bond yield was up five basis points at 6.70% after the announcement.

"The MPC has refrained from an outright dovish signal by maintaining the stance at neutral. The recent rupee depreciation was not a hurdle for the policymakers, with intervention tools likely to be tapped to defend the currency vs dollar strength. We maintain our call for another 25 bps cut in repo rate in April," Radhika Rao, Executive Director and Senior Economist, DBS Bank, said.