Interest rate sensitive stocks gained more as RBI kept the current stance

Interest rate-sensitive stocks: After the RBI kept the status quo on the key policy rate and unanimously changed the stance to ‘neutral’, interest rate sensitive stocks strengthened further. The Nifty Bank at one point traded slightly lower with a gain of around 1 percent or 430 points, led by gains in ICICI Bank, State Bank of India and Axis Bank among others.

Interest rate sensitive sectors are often impacted by significant changes in policy rates as they result in a direct impact on the companies borrowing cash, profitability and future cash flow.

Also, the increase or decrease in the rate affects the supply of bank loans in different sectors of the economy. In general, rate hikes slow or limit the flow of credit, while rate cuts can improve it.

From the banking pocket, the Nifty Private Bank index which fell by a tad also rose after the RBI policy announcement.

Nifty Financial Services also moved into the green and ended trading up 0.8 percent, with all financial stocks trading in the green, barring HDFC Bank.

Meanwhile, realty stocks were very strong, with the Nifty Realty jumping more than 2 percent. From the portfolio, all but 2 stocks traded in the green, with gains of more than 5 percent in Phoenix, followed by gains of more than 4 percent in Macrotech Engineers.

Dharmendra Raichura – VP and Head of Finance at Ashar Group said “As real estate developers, we recognize the importance of a fixed repo rate, as it directly affects the cost of borrowing and impacts the real estate sector. This strong rate creates an ideal environment for sustainable growth and development within of real estate, which promotes the stability of the industry.”