How did banking, realty and NBFC stocks perform today after RBI repo rate decision? Stocks to buy ahead

During its meeting in April, the RBI's monetary policy committee (MPC) opted to maintain the policy repo rate at 6.50 percent. After the statement by the RBI, the Public Sector Undertaking (PSU) banks saw a boost as the NIFTY PSU bank rose by 0.33%, with the top 5 performers being Bank of Maharashtra up 1.95%, PNB up 1.07%, SBI up 0.90 %, IOB up 0.44%, and Central Bank of India up 0.40%.

On the other side, Nifty Bank index was up 0.10% with the top performers as AU SFB up by 1.90%, IndusInd Bank up by 1.57%, and Bandhan Bank up by 0.87%. 

However, Nifty Realty Index saw a major upside gain of 2.84%, with top 5 performers as Godrej Properties up by 6.48%, DLF up by 4.07%, Oberoi Realty up by 3.94%, Sobha up by 2.11% and Mahindra Lifespace Developers up by 1.86%. 

The decision to maintain the repo rate at 6.50% was also a piece of positive news for Nifty Financial Services Index being bullish by 0.49% and including top 5 performers as Cholamandalam Investment and Fin Co up by 7.31%, Bajaj Finance up by 3.29%, Muthoot Finance up by 3.05%, Bajaj Finserv up by 2.04% and IEX up by 10.55%.

Rahul Malani, Banking and NBFC, Fundamental Analyst at Sharekhan by BNP Paribas said “Interest Rate hike has been paused by RBI for the time being. However RBI hinted that there could be possibility of rate hike in future meetings based on the future CPI reading thus RBI continued to focus on the objective of anchoring inflationary expectations and retain withdrawal of accommodative stance. This has been positively taken by the market as an indication of end of the higher interest rate cycle. In Banking space our preferred picks are Axis, ICICI, HDFC, Federal, AU SFB. In NBFC Space our preferred picks are HDFC Ltd, Chola Finance M&M Finance & Can Fin Homes. NBFCs tends to outperform banks after the higher interest rate cycle ends.”

Commenting on the banking stocks to buy ahead Dnyanada Vaidya, Research Analyst, Axis Securities said “A surprising pause by the RBI in today's MPC meeting gave the banking sector a reason to cheer, as this move would help lenders sustain their growth momentum. Though the regulator has also not ruled out the possibility of another rate hike in the coming policy meetings, a hike, if any, would be largely data-driven. We prefer ICICI Bank, SBI, and Federal Bank.”

Amit Gupta, MD, SAG Infotech said “The market anticipated that the RBI MPC meeting would result in a rate increase of 25 basis points. Nonetheless, the Indian central bank's preference to maintain unaltered interest rates has startled both investors and observers. This decision, which permits banks to continue functioning in the near term, is meant to stimulate economic development and help the banking sector. Nifty Bank has performed better than the Sensex and Nifty as a result. When concerns of a global financial crisis fade in the medium term, relief rallies are anticipated in the banking sector. Due to the appealing affordability of house purchases and a strong desire for home ownership, the business has persevered despite several increases in home loan interest rates ranging from 6.5% to 8.75%.”

“As a result, the housing sector's current growth rate is anticipated to continue, if interest rates are not increased further. The banking and NBFC industries, as well as other industries like real estate and infrastructure, are projected to benefit from the decision to maintain the repo rate's stability. In the near future, it is anticipated that stocks in the banking, auto, and consumer durable sectors would lead an increase. Investors looking to profit from this trend in the near future could think about buying shares in PSU banks like SBI and Canara Bank, as well as Axis Bank and ICICI Bank. Also, it would be wise to investigate Mahindra & Mahindra (M&M) stock in the near future,” said Amit Gupta.

Ruchit Jain, Lead Research, 5paisa.com said “RBI paused rate hike which led to buying interest in the rate sensitive stocks. Although RBI mentioned that it's not a pivot, it certainly indicates that we may be near the end of the rate hike cycle and hence, beaten-down rate sensitive stocks are likely to witness buying momentum in the near term. Stocks such as DLF, CanFin Home could witness buying interest and hence, positions traders can look to buy such stocks on declines now.”

A R Ramachandran, Co-founder & Trainer-Tips2trades said “An unexpected pause in interest rate hike by RBI has led to a slightly confused and muted market today as indicated in all the major indices movement including banks, realty & NBFC stocks. Reliance industries seems to have settled in a steady uptrend and any dip till support of 2310 can be used to buy for a target of 2425 in the near term."

As the RBI paused its decision to raise the repo rate, the markets continued to rise, driven by a strong rebound in real estate stocks. While the Sensex came very close to crossing the 60,000-point level and it was the broader markets that bested the key index at 17,599.15 mark, with Nifty Mid Cap and Nifty Small Cap rising by 0.6% and 0.8%, respectively.