After RBI hikes repo rate by 25 bps, some bank, auto stocks rally; Nifty Auto jumps 2%

Stocks from the rate-sensitive sectors such as realty, banking and auto gained in Wednesday's trade after Reserve Bank of India hiked interest rate by 25 basis points to 6.25% in its second bi-monthly monetary policy review of financial year 2019.  

Nifty Bank gained 0.4 per cent to 26,365.50. On the index, IDFC Bank, State Bank of India and Punjab National Bank added the most, rallying up to 6 per cent. However, big private lenders HDFC Bank, ICICI Bank and Axis Bank shed up to 0.3 per cent.

Nifty Auto jumped 2 per cent to 11,170.85, led by gains in Bosch (6.2 per cent), Tata Motors (3.8 per cent), and Eicher Motors (2.5 per cent).

Nifty Realty index also added nearly 2 per cent to 283.45. Indiabulls Real Estate, Godrej Properties, and Phoenix rallied between 2 per cent to 3 per cent. HDIL was the sole loser, slipping 4 per cent.  

The RBI raised its policy rate for the first time in more than four years, due to inflation concerns, but kept its policy stance as “neutral”.

The monetary policy committee lifted the repo rate by 25 basis points to 6.25 per cent, the first increase since January 2014.

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All six members on the rate panel voted for an increase.

"I believe rate hike view of RBI is against the backdrop of market uncertainties, liquidity and imbalances in the bond market. While domestic macro factors are the primary concern for RBI, the global backdrop has become more important in recent months," said Mahesh Singhi, Founder & MD, Singhi Advisors.

"Emerging market economies are opting for interest rate hikes to defend their currencies at a time of strong portfolio outflows. India, too, has seen outflows with foreign investors selling. RBI has thus weighed higher rates as a buffer for the currency markets & as a caution of increasing possibility of a ‘sudden stop’ for the global economic recovery. I believe these rate hikes will provide some support to the Indian currency," he added.