Interest rate-sensitive realty, auto, and bank stocks witnessed mixed trading on Friday after the Reserve Bank raised its key interest rate by 50 basis points (bps) in a more hawkish stance to curb rising inflation. The BSE Bankex index rose over 1%, extending opening gains, while the BSE Realty index rose to 6%. However, the BSE Auto saw choppy trade, swinging between gains and losses near the baseline. At the time of reporting, the auto space was quoting 0.15% lower. In comparision, the BSE benchmark Sensex was trading near day’s high at 58,644 levels, up 346 points, 0.6%, as investors seemed to have reacted positively to the RBI policy decision.

Among realty counters, Indiabulls Real Estate was the top performer with more than 2% gains, followed by DLF, Sobha, and Lodha Developers, which rose between 1% and 1.6%. Among others, Godrej Properties, Oberoi Realty, and Prestige Estates Projects were trading marginally higher. Sunteck Realty and Brigade Enterprises were reeling under stress.

In the auto space, Tube Investments topped the chart, with more than 4% gain. Index heavyweight TVS Motor, Tata Motors, and Escort were also up with marginal gains. On the flip side, Bajaj Auto, Maruti, Hero MotoCorp, and Ashok Leyland were among the top laggards.

Reserve Bank of India (RBI) on Friday hiked policy rate (repo rate) by 50 bps to 5.4% to tame inflation. As a result, the standing deposit facility (SDF) rate was revised up to 5.15%, and the marginal standing facility (MSF) rate and the bank rate to 5.65%. In the last three months, the RBI has raised the repo rate by a cumulative 140 bps in three months – 50 bps today, 40 bps in an off-cycle meeting in May, and 50 bps in June.

Commenting on RBI policy, Sunil Damania, chief investment officer, MarketsMojo, says, “We had expected the RBI to hike the interest rate by 25-35 basis points. However, it has hiked by 50 basis points. One of the reasons why the RBI has decided to act a tad aggressive in hiking the rate of interest is to protect the Indian currency. This is back on yesterday's occurrence, where the Bank of England hiked interest rate by 50 basis points. As we advance, at the maximum, the RBI may have one more rate hike and perhaps pause on announcing further rate hikes.”

“As expected RBI has hiked by 50 bps keeping them in line with what other central banks have done. Till inflation is brought under control, we believe the bias remains in favour of higher rates,” says Sameer Kaul, MD & CEO, TrustPlutus Wealth.

The market sentiment got a boost after the RBI retained the real GDP growth projection for FY23 at 7.2%, with Q1 at 16.2%; Q2 at 6.2%; Q3 at 4.1%; and Q4 at 4%. Real GDP growth for Q1 FY24 is projected at 6.7%. However, elevated risks emanating from protracted geopolitical tensions, the upsurge in global financial market volatility and tightening global financial conditions continue to weigh heavily on the outlook.

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