RBI Policy Meeting in Focus: Holds Repo Rate At 5.25%; Realty, Auto Stocks Lead Rate-Sensitive Rally

Rate-sensitive stocks advanced on Wednesday after the Reserve Bank of India kept the repo rate unchanged at 5.25%, with realty and auto stocks leading the gains while banking and financial shares traded on a mixed note through the session.

The Monetary Policy Committee (MPC), headed by Governor Sanjay Malhotra, voted unanimously to hold the benchmark rate and retained its neutral policy stance, a decision that was largely in line with Street expectations. Rate-sensitive sectors such as realty and automobiles outperformed after the policy announcement, while banking stocks remained mixed.

Governor Malhotra said inflation could edge higher in the near term due to firm crude oil and food prices before easing later in the financial year. He also flagged geopolitical tensions in West Asia and uncertainty around the southwest monsoon as key risks to the economic outlook.

Realty stocks emerge as top gainers

The Nifty Realty index was the best-performing sectoral gauge of the session, rising as much as 2.56% to 914, with an intraday high near the 915 mark.

Godrej Properties led the pack with a gain of about 4.6%. DLF advanced 3.19%, while Prestige Estates Projects added 2.70%. Macrotech Developers rose 2.67% and Oberoi Realty gained close to 2.6%. Sobha, Phoenix Mills, Aditya Birla Real Estate, Brigade Enterprises and Anant Raj also traded in positive territory, with all constituents of the index in the green through the day.

Realty stocks outperformed after the policy decision, as stable interest rates are generally viewed as supportive for housing demand and financing costs.

Auto stocks extend gains

The Nifty Auto index climbed 1.17% to 29,381.35, touching an intraday high near 29,425, with gains seen across automobile and auto ancillary stocks.

Bosch led the index with a gain of close to 3%, followed by Exide Industries, up around 3%. Tube Investments of India advanced 2.74%, Ashok Leyland rose 2.51% and Hero MotoCorp climbed 2.43%. TVS Motor also featured among the stronger gainers. Uno Minda, Motherson, Sona BLW Precision Forgings, Bharat Forge and Mahindra & Mahindra traded higher through the session, while Bajaj Auto, Eicher Motors and Maruti Suzuki posted more modest gains.

Banking stocks remain range-bound

Banking counters failed to join the broader rally, with the Nifty Bank index slipping as much as 0.5% intraday before paring losses to close marginally lower at 57,876.80, down 0.05%.

The move masked a sharp divergence within the sector. The Nifty PSU Bank index rose about 1.3%, with Union Bank of India up 1.50% and Bank of Maharashtra, Bank of Baroda, Indian Bank, Canara Bank, State Bank of India and Punjab National Bank also trading higher.

Private lenders told a different story, with the Nifty Private Bank index down close to 1%. HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, AU Small Finance Bank, Federal Bank and IndusInd Bank all traded in the red, with Federal Bank, Axis Bank and Kotak Mahindra Bank among the steepest decliners on the private banking gauge.

Financial services trade mixed

The Nifty Financial Services index declined 0.23% to 26,783, as gains among insurers and non-banking lenders were offset by weakness in heavyweight private banks.

ICICI Lombard General Insurance was the top gainer in the index, surging 3.82%. Muthoot Finance rose 1.43% and Shriram Finance added 1.31%, while HDFC Life advanced 1.24%. Bajaj Finance and Max Financial Services each rose 0.55%, and State Bank of India, SBI Card and Cholamandalam Investment and Finance also traded higher.

On the downside, HDFC Bank fell 0.51%, while Jio Financial Services, ICICI Bank, Power Finance Corporation, REC, Kotak Mahindra Bank, SBI Life Insurance and Axis Bank traded lower. BSE was the biggest loser in the index, declining 2.21%.

Investors will now monitor upcoming inflation and growth data for further cues on the RBI's policy trajectory.

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