RBI cuts repo rate by another 25 bps; here’s how bank, auto, realty stocks reacted

In line with Dalal Street expectations, the Reserve Bank of India (RBI) announced repo rate cut by another 25 basis points to 6% to address liquidity shortages and support economic growth amid uncertainties about global trade scenario.  This marks the second consecutive rate cut this year, following a similar reduction in February, indicating shift in the RBI’s stance to “accommodative” to ensure economic stability in a challenging time as risks remain high due to U.S. President Donald Trump’s tariff polices. Additionally, the RBI has reduced its GDP growth projection to 6.5% due to external challenges like US tariffs.

Reacting to the RBI policy announcement, the Indian stock market trimmed some early losses but continue to trade in negative terrain weighed down by metal and IT stocks. Rate sensitive stocks such as auto, banking, and real estate continued to trade lower amid persistent concerns about economic growth in aftermath of Trump’s aggressive tariffs announcement. 

At 10:40 AM, the BSE Sensex was down by 348 points, or 0.48%, at
73,878, while the Nifty50 was at 22,395, lower by 140 points, or 0.62%. The broader market continued to bleed, with the BSE midcap and smallcap indices falling over 1.5% each.

Among the rate-sensitive sectors, banking space saw surge in selling, with BSE Bankex index sinking 0.8%. All banking heavyweights, including State Bank of India, HDFC Bank, ICICI Bank, Bank of Baroda, were flashing in red, falling in the range of 1-3%.

The financial services stocks were also under stress, with IIFL Securities, Bajaj Finance, Bajaj Finserv, JIo Financial, Paytm, Aditya Birla Capital, LIC Housing Finance falling up to 4%.  

The realty sector saw a similar trend, with sectoral leaders Godrej Properties, Lodha, DLF, Oberoi Realty and Prestige floating in negative terrain. The shares of Sunteck Realty and Brigade also witnessed selling pressure.

On the other hand, auto sector saw mixed trend, with index heavyweights M&M, Maruti Suzuki India, Ashok Leyland, TVS Motor, and Bajaj Auto trading higher with marginal gains. On the other hand, Tata Motors,Hero MotoCorp, Balkrishna Industries, MRF, Apollo Tyre were down in the range of 1-4%.

Rate cut to support economic growth, say experts

The repo rate cut, in line with market expectations, will lower borrowing costs to the lowest level since November 2022, amid easing inflation and slowing economic growth, said Jigar Trivedi, Senior Analyst, Reliance Securities. “With global uncertainties, this rate cut may support economic growth. The USD/INR pair is expected to trade between 86.00 and 86.90 next week, shortened by holidays,” he said.

Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS, said the central bank has also changed its stance from neutral to accommodating, paving the way for further rate cuts in the upcoming meetings. Regarding margins for banks, he expects the full impact of the rate cut to reflect from Q1 FY26, with a partial impact visible in Q4 of FY25. He said that systemic liquidity has been in deficit for the more significant part of the quarter, though it eased into surplus as banks exit Q4 FY25. “We expect the transmission on the cost of funds side to be slower vs the pace of transmission on the yields.”

Going ahead, Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank, sees scope for additional 75-100 bp of rate cuts in the year ahead depending on the scale of global slowdown.” We note the increasing global turmoil and its spillovers to the Indian growth slowdown will necessitate the MPC for deeper rate cuts,” she said.

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