Auto and Realty Stocks Soar as RBI Cuts Repo Rate by 50 Basis Points
The Reserve Bank of India's (RBI) decision to cut the repo rate by 50 basis points has significantly boosted auto and real estate stocks, with some gaining up to 4%. This move is expected to lower interest rates, making loans more affordable and potentially boosting sales and demand in these sectors.
Repo RateAuto StocksReal EstateRbiMarket PerformanceReal EstateJun 06, 2025
Both benchmark indices, Sensex and Nifty, which opened the day on a quiet note, saw a sharp upward move post the announcement. At the time of writing, the Sensex had jumped over 600 points to 82,067.34, while the Nifty Bank index surged more than 200 points, trading around 24,971.65.
“The higher-than-expected 50bp rate cut decision by the MPC, though positive for growth is slightly negative from the market perspective for the near-term. This big rate cut is, as the RBI Governor remarked, front-loading of the rate cut. The change in monetary stance from accommodative to neutral also indicates that more rate cuts are unlikely unless the situation warrants. This big rate cut will impact the margins of the banks and, therefore, bank stocks will be under pressure in the near-term. However, the credit growth that this rate cut will hopefully stimulate will compensate for the dip in margins,” said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
Auto Stocks in Top Gear on Hopes of Sales Boost
The Nifty Auto index zoomed over 1% after the policy announcement, trading at 23,528.60. Lower interest rates typically make car and two-wheeler loans more affordable, which may boost demand.
Stocks such as Ashok Leyland rose nearly 3%, while Hero MotoCorp gained over 2%. Other notable gainers included Bajaj Auto, Motherson, and Bharat Forge, all of which were trading firmly in the green.
Real Estate Stocks Surge on Higher Demand Hopes
Homebuyers might have something to cheer for too. The Nifty Realty index surged over 3.5%, hitting 1,028 levels, as the rate cut is expected to lower home loan EMIs and revive housing demand.
“A rate cut, while widely anticipated in some quarters, comes as a welcome move for the real estate sector. Lower borrowing costs will positively influence affordability and purchasing decisions, particularly in the budget and mid-income segments. While luxury homebuyers are typically not driven by EMIs or interest rates, a softening monetary policy signals broader economic confidence. Overall, a rate cut acts as a confidence marker, even if its direct impact on the luxury segment is limited,” said Ramani Sastri, Chairman & MD, Sterling Developers.
Among the top performers were Godrej Properties, DLF, Oberoi Realty, Prestige, and Sobha, with gains ranging between 4% and 5%. The only laggard in the pack was Raymond, which stayed in the red.
RBI Delivers the Third Rate Cut in 2025
The RBI’s Monetary Policy Committee (MPC) cut the repo rate, that is the key lending rate for commercial banks to 5.5% from 6%, a 50-bps cut.
According to the RBI, the Standing Deposit Facility (SDF) rate now stands at 5.25%, while the Marginal Standing Facility (MSF) and Bank Rate have been adjusted to 5.75%.
This is the third consecutive rate cut in 2025, bringing the total reduction this year to 100 basis points.
Frequently Asked Questions
What is the repo rate and why is it important?
The repo rate is the interest rate at which commercial banks can borrow from the Reserve Bank of India (RBI). It is crucial because it influences the cost of borrowing for banks, which in turn affects the interest rates they charge to customers for loans and credit.
How does a repo rate cut impact the stock market?
A repo rate cut generally has a positive impact on the stock market, especially on sectors sensitive to interest rates like auto and real estate. Lower interest rates can boost consumer spending and business investments, leading to higher stock prices.
Which sectors are most likely to benefit from the repo rate cut?
Sectors that are most likely to benefit from a repo rate cut include auto, real estate, and banking. Lower interest rates make loans more affordable, which can boost demand for cars, homes, and other big-ticket items.
How will the rate cut affect home loan EMIs?
The rate cut is expected to lower home loan EMIs, making it more affordable for homebuyers. This can boost demand in the real estate sector and help revive the housing market.
What is the impact of the repo rate cut on bank stocks?
While the repo rate cut can stimulate credit growth, it may also impact the margins of banks in the short term. This is because lower interest rates can reduce the interest income banks earn from loans. However, the long-term benefits of increased credit demand can offset this initial pressure.
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