RBI's Rate Cut: Impact on Real Estate, Banks, and Auto Sectors in 2025

While 2025 witnessed heightened financial activity across sectors, one of the most significant developments was the Reserve Bank of India’s (RBI) decision to cut lending rates for the first time in five years. The central bank cut the repo rate by a total of 125 basis points (bps) over four times in 2025. The repo rate, which is the interest rate at which the RBI lends to commercial banks, was lowered from 6.50% at the start of the year to 5.25% by year-end.

In February 2025, RBI Governor Sanjay Malhotra announced a 25 bps cut in the policy rate, bringing it down from 6.50% to 6.25%. In April 2025, there was another cut by 25 bps, bringing the rate down to 6.00%. In June 2025, the RBI made a more aggressive cut, 50 bps, lowering the repo rate to 5.50%. Lastly, in December 2025, the RBI announced a repo rate cut by 25 basis points to 5.25%.

However, in August and October reviews, there was no change announced in the repo rate, and it stayed at 5.50%. The central bank also adopted a “neutral” policy stance.

Here’s how rate-sensitive stocks performed in 2025

Auto Stocks

The auto sector has emerged as one of the strongest performers this year, with auto stocks ranking among the top gainers across sectors. The Nifty Auto index has climbed 20.5% so far in 2025. One of the key drivers behind the rally has been RBI’s repo rate cut, which lowered auto loan interest rates. The reduction in EMIs improved vehicle affordability, encouraging buyers to advance purchase decisions and supporting volume growth across segments.

Beyond monetary policy easing, the sector also benefited from structural reforms, particularly the reduction in GST rates across most vehicle categories. Within the Nifty Auto index, Ashok Leyland led the gains with a 59.5% rise year-on-year, followed by Maruti Suzuki India (55.6%), Eicher Motors (52.6%), TVS Motor Company (51%), and Hero MotoCorp (33.8%).

Real Estate Stocks

Despite RBI’s rate cut, realty stocks have been under pressure for most of the calendar year 2025. On a year-to-date (YTD) basis till December 24, 2025, the Nifty Realty index has declined 15%. Various analysts have attributed the decline in real estate stocks primarily to valuation concerns.

After RBI’s last rate cut in December 2025, Anuj Puri, Chairman of ANAROCK Group, had said that the central bank’s 25 bps repo rate cut is a clear positive for the Indian real estate sector as 2025 draws to a close. He added that, following earlier easing measures this year, the move further enhances the value proposition for homebuyers, especially in the affordable and mid-income segments that are highly sensitive to interest rate changes.

On the Nifty Realty index, The Phoenix Mills was the sole gainer, rising 9.2% on a year-on-year basis, while all other stocks ended in the red. Anant Raj led the losses with a 31% decline, followed by Brigade Enterprises (-30.5%), Godrej Properties (-30%), Oberoi Realty (-27%), and Lodha Developers (-23%).

Banking Sector

A lower borrowing cost typically boosts credit demand and improves asset quality of a bank, which is positive for banking stocks over the medium term. The public sector banks remained in trend throughout the year, with key PSU banks like Canara Bank, Indian Bank, and Bank of India being top performers in the index. The non-banking financial services companies (NBFCs) were the second-best performer at the index level. However, stocks in the index have posted high double-digit returns.

The sector, particularly NBFCs, went through structural changes as RBI eased regulations on lending to the small and medium enterprises space, opening the door for untapped lending opportunities. The Nifty Bank index has risen 15.5% so far this year, driven by strong gains in AU Small Finance Bank (up 75.1%), Canara Bank (48.9%), and IDFC First Bank (35.2%). IndusInd Bank was the only laggard on the index, slipping 9.3% over the period.