Rate-Sensitive Stocks Surge as RBI Keeps Repo Rate Unchanged
The Reserve Bank of India (RBI) maintained the repo rate at 5.5%, leading to a positive response in rate-sensitive sectors such as autos, real estate, and financials. This decision is expected to support economic growth while keeping inflation in check.
Repo RateRbiRatesensitive StocksMpcInflationReal EstateOct 01, 2025
The RBI Governor announced that the MPC unanimously agreed to keep the repo rate unchanged at 5.5% and retain the neutral policy stance. This decision reflects a balanced approach to managing inflation risks and supporting economic growth. The RBI revised the average headline inflation for the financial year 2026 to 2.6%, down from the earlier projection of 3.1%. Additionally, the Real GDP growth estimate for FY26 has been revised upward to 6.8% from 6.5%, citing stronger-than-expected economic performance.
Following the policy announcement, Indian stock markets continued their upward trend. The Sensex gained 306.67 points to reach the day's high of 80,574.29, while the Nifty 50 rose 84.3 points to 24,695.40. However, broader market indices, including midcap and smallcap stocks, underperformed the benchmarks, adding just 0.08% and 0.15%, respectively.
The MPC’s unanimous decision to hold the repo rate reflects a careful balance between sticky inflation risks and the need to support growth. With elevated crude prices, uneven monsoons, and global financial volatility, the RBI has chosen to stay cautious and data-driven. This pause signals policy stability ahead of the festive season, anchoring inflation expectations without choking credit growth. For markets, the status quo was largely priced in, but the tone of vigilance suggests rate cuts are unlikely before late 2025 or even 2026. Bond yields may stay range-bound, while equities should take comfort in policy continuity. Rate-sensitive sectors like autos, real estate, and financials could benefit at the margin, but the real drivers for the next leg of the rally remain global liquidity trends and corporate earnings momentum, according to Sonam Srivastava, Founder and Fund Manager at Wright Research PMS.
Rate-sensitive sectors, particularly banks and financial services, showed strong reactions to the RBI’s decision. The Nifty Bank index surged 0.7%, while the Nifty Financial Services advanced by 0.75%. Nifty Private Bank also rose 0.8%, and the Nifty Auto and Nifty Realty indices gained 0.5% and 0.4%, respectively.
Within the Nifty Bank index, gains were seen in only four stocks, with the rest trading in the red. ICICI Bank was the top gainer, up 1.63%, followed by Kotak Bank, up 1.59%. HDFC Bank and Axis Bank rose 0.95% and 0.17%, respectively. However, IDFC First Bank lost 1.7%, making it the top loser in the sector, followed by Canara Bank and IndusInd Bank, down over 1% each. Federal Bank, SBI, Bank of Baroda, and Punjab National Bank also shed over 0.5% each.
In the financial services space, REC led the rally with a 2.8% increase, followed by PFC, which added 2.4%. Shriram Finance also rose 1.5%. However, SBI Card was the top loser, down 2.5%, followed by Chola Finance and Bajaj Finance, down over 1% each.
The auto sector also saw a positive performance, with Tata Motors leading the charge with almost 3% gains, followed by M&M, which rose 2%. Uno Minda, Exide Industries, Eicher Motors, and TVS Motor were also in the positive in intra-day deals. However, Bharat Forge, Maruti, TI India, Hero MotoCorp, and Ashok Leyland lost over half a percent each.
In the realty sector, Godrej Properties emerged as the top gainer, rising around 2%, while Prestige, DLF, Lodha, and Oberoi Realty also gave positive returns. However, Anant Raj, Signature Global, Sobha, and Phoenix were in the red.
The RBI’s decision to maintain the repo rate at 5.5% for the second consecutive time continues to support stability amidst external trade frictions and fast-changing global economic conditions. This pause, along with the central bank’s 'neutral' stance, reflects cautious optimism, factoring in the resilient domestic economy and moderating inflation levels. The central bank has consequently revised the GDP growth projection upwards by 30 basis points to 6.8% for FY 2025-26.
Banks are yet to fully transmit the earlier 100 basis points repo rate reduction, which is expected to be completed soon during the ongoing festive season. This is expected to benefit the real estate sector, especially homebuyers in the affordable and mid-income segments. Additionally, the recent GST rationalization in key construction materials such as cement can allow room for developers to lower prices and offer lucrative deals to push housing sales. Overall, timely GST rationalization, stable financing costs, and festive discounts augur well for real estate, especially housing, warehousing, retail, and hospitality demand, according to Vimal Nadar, National Director and Head of Research at Colliers India.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of this publication. We advise investors to check with certified experts before making any investment decisions.
Frequently Asked Questions
Why did the RBI keep the repo rate unchanged?
The RBI kept the repo rate unchanged to balance the need to support economic growth while managing inflation risks. The decision reflects a cautious and data-driven approach, considering factors like elevated crude prices, uneven monsoons, and global financial volatility.
How did the stock markets react to the RBI's decision?
The Indian stock markets, particularly the Sensex and Nifty 50, showed a positive response to the RBI's decision. The Sensex gained 306.67 points, and the Nifty 50 rose 84.3 points. However, broader market indices like midcap and smallcap stocks underperformed.
Which sectors benefited the most from the unchanged repo rate?
Rate-sensitive sectors such as autos, real estate, and financials benefited the most. The Nifty Bank, Nifty Financial Services, Nifty Auto, and Nifty Realty indices all showed gains, with some stocks in these sectors leading the rally.
What is the revised GDP growth estimate for FY26?
The RBI revised the Real GDP growth estimate for FY26 upward to 6.8% from the earlier projection of 6.5%, citing stronger-than-expected economic performance.
What are the implications of the RBI's decision for the real estate sector?
The RBI's decision to maintain the repo rate and the expected completion of the earlier 100 basis points rate reduction during the festive season are expected to benefit the real estate sector. This, along with the recent GST rationalization in construction materials, can lead to lower prices and attractive deals for homebuyers.
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