Interest rate-sensitive stocks close with losses

Most of the interest rate-sensitive stocks closed with losses of up to 8.2 percent on August 7 even as the RBI slashed the benchmark lending rate.

From the banking pack, RBL Bank plunged 8.16 percent, SBI dropped 3.75 percent, Axis Bank 2.77 percent, Federal Bank 1.53 percent, Kotak Mahindra Bank 0.58 percent, ICICI Bank 0.49 percent and HDFC Bank 0.19 percent on the BSE.

The BSE bank index fell by 1.01 percent to close at 31,375.87.

Among auto firms, M&M dropped 5.62 percent, Motherson Sumi Systems 4.69 percent, Tata Motors 4.20 percent, Ashok Leyland 3.70 percent, TVS Motor 2.66 percent, Maruti Suzuki 0.91 percent and Bajaj Auto 0.28 percent.

related news

The auto index closed at 15,324.33, down 2.10 percent.

Some realty stocks also faced selling pressure, with Oberoi Realty falling 2.04 percent, DLF 1.48 percent, Godrej Properties 1.02 percent, Sobha Limited 0.70 percent and Omaxe Limited 0.41 percent.

The realty index tumbled 1.38 percent to close at 1,996.94.

“In a slight deviation from earlier policies, RBI surprised by cutting the repo rate by 35 bps vis-à-vis expectations of a 25 bps rate cut, while maintaining an accommodative stance.

“So far RBI has reduced the repo rate by 110 bps which would benefit the demand in interest-sensitive sectors mainly real estate, automobile, consumer durables, etc as and when it is transmitted by the banking system,” said Arun Thukral, MD and CEO, Axis Securities.

The Reserve Bank of India (RBI) on Wednesday cut interest rate by a rare 35 basis points — the fourth successive reduction — to a nine-year low of 5.40 percent in an attempt to boost an economy growing at its slowest pace in nearly five years.

“The 35 bps rate cut is higher than the consensus and our expectation of 25 bps rate cut. This clearly shows RBI’s concern about growth performance and outlook and urgency to take measures to revive growth.

“With 110 bps cumulative rate cuts, banks would be under moral pressures to cut lending rates which can depress NIM. This is negative for the sector and positive for interest sensitive sectors,” said Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.

What do you think?

5559 points
Upvote Downvote

Written by wcrcleaders

Spandana Sphoorty Financial IPO subscribed 1.05 times on final day

3 Countries Cut Rates as World Braces for More Trade War Turbulence