MUMBAI: The Reserve Bank of India’s (RBI) widely anticipated 25 basis points rate cut – the first in nearly five years – failed to provide a boost to equity markets, with the benchmark indices erasing early gains. The Sensex and Nifty traded flat as investors saw little incremental positive surprise in the decision.
Rate-sensitive sectors, including banking, automobiles, and real estate, initially reacted positively but lost momentum soon after. The Nifty Bank and Nifty Realty indices slipped into the red, while Nifty Auto turned flat. The Nifty Consumer Durables index was an outlier, inching up 0.2 per cent as expectations of lower financing costs supported demand for household goods.
Despite increased liquidity, the Nifty FMCG index declined over 1 per cent, reflecting investor caution regarding near-term demand trends. Meanwhile, discretionary stocks fared better, with Voltas and Havells gaining on hopes of improved consumer spending.
Auto sector to benefit
“The auto sector stands to benefit, with two-wheeler makers like Hero MotoCorp and TVS Motor seeing higher demand from both rural and urban markets,” said Narendra Solanki, Head of Research at Anand Rathi. Budget car manufacturers such as Maruti Suzuki are also expected to gain from improved affordability.
International brokerage Morgan Stanley noted that lenders with higher fixed-rate assets and floating-rate liabilities could see a positive impact. Vehicle financiers and gold loan providers are likely to benefit, while housing finance companies may face some margin pressure.
Among stocks, M&M Financial Services and SBI Cards emerged as key gainers, while LIC Housing Finance saw weakness. Morgan Stanley remains overweight on PNB Housing Finance, Shriram Finance, and Bajaj Finance, expecting them to outperform in terms of growth and asset quality. Housing finance players with limited rate sensitivity, including PNB Housing Finance, Home First Finance, and Aptus Value Housing Finance, could fare better than peers reliant on rate spreads
