The RBI’s surprise 25-bps rate cut on Wednesday took markets to all-time highs, before profit-booking pulled indices back into the red.

The rate cut, which RBI attributed to faster-than-anticipated disinflation, pushed the rate-sensitives higher by 1-3% on Wednesday. The BSE Bankex gained as much as 3.2%. BSE Auto and BSE Realty gained as much as 1.2% and 3%, respectively, before closing in the red.

Market experts believe private banks and non-banking financial companies (NBFCs) stand to gain the most from the rate cut. “As the economy picks up, the enhanced credit requirements of the economy would be met by the BFSI sector. As interest rates soften, asset quality pressures would ease,” said Nilesh Shah, MD, Kotak Mahindra AMC.

Real estate and automobiles would benefit from lower EMIs, Shah added.

Among banking stocks, Axis Bank, SBI, Kotak Mahindra Bank, Punjab National Bank and Bank of Baroda gained as much as 3-6%, before closing below previous day’s closing price. Among realty stocks, DLF and NBCC gained as much as 4-7%, during the day. Among auto stocks, Bosch, Bajaj Auto, Bharat Forge, Hero Motocorp, Eicher Motors and Tata Motors gained as much as 1-3% during the day.

Experts maintain a positive outlook on rate-sensitives as they see more rate cuts. “We believe that inflation will decelerate to 4.75% by end 2015 in our base case and 4% in our bull-case scenario. This inflation outlook and the real rate policy framework followed by RBI, therefore, means that RBI will cut rates by a further 100 bps though CY 2015, with the next move happening during the April 7 meeting,” Morgan Stanley said in a note.

In a statement on Wednesday, RBI said softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6% in the second half. The fiscal consolidation programme, while delayed, may compensate in quality, especially if state governments are cooperative. Given low capacity utilisation and still-weak indicators of production and credit off-take, it is appropriate for the Reserve Bank to be pre-emptive in its policy action to utilise available space for monetary accommodation.