Interest rate-sensitive stocks —banking, realty and auto — fell on Wednesday after the Reserve Bank of India (RBI) cut repo rate by 25 basis points citing a sharp fall in inflation, at its third bi-monthly monetary policy review for FY18. Repo rate is the rate at which the RBI lends money to commercial banks in the event of any shortfall of funds. The Sensex fell by 98.43 points and closed the session at 32,476.74, a loss of 0.30%. The BSE Bankex fell 0.16% and ended the session at 28,356.31. Six of the10 constituents of the BSE Bankex ended the session in the red. State Bank of India’s stock fell by 0.37%. Shares of private banks like HDFC Bank, Federal Bank, ICICI Bank and IndusInd Bank fell anywhere between 0.04% and 0.54%, with Kotak Mahindra Bank registering the biggest fall.
The BSE Realty index fell by 0.20% and ended the session at 2182.80. Barring three, all the constituents of the BSE Realty index fell. The share price of Unitech fell by 4.31%, Sobha Developers fell by 2.28%, and Godrej Properties fell by 1.74%. The auto index also fell by 0.26% and ended the session at 24,784.10. More than half of the constituents of the Auto Index fell. Ashok Leyland fell the most by 1.71% and ended the session at Rs 109.10.In a note to investors after the monetary policy, Nomura said RBI’s rate decision and its neutral stance are in line with expectations. The note further said the headline is expected to rise gradually to above the medium-term target of 4% on higher food prices and other factors like HRA increases, and adverse base effects among other things.
“Given our expectation of both growth and inflation rising over the next six to 12 months, we expect a prolonged pause from the RBI,” the note added. Market participants said the fall in stock prices is probably on profit booking as there was no positive surprise to extend the rally.