Markets cheer RBI’s pause, realty stocks zoom

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Markets cheer RBI’s pause, realty stocks zoom
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  • The Reserve Bank of India paused its rate hike cycle and kept the repo rate unchanged at 6.50% on Thursday, against wide expectations for a 25 basis point hike.
  • Markets went straight up after the RBI decision with the Sensex rising 146 points, or 0.25%, to 59,847 while the Nifty50 gained 40 points, or 0.23%, to hit 17,597.
  • Since May 2022, India’s central bank has increased the repo rate by 250 basis points. Repo is the rate at which the central bank lends short-term funds to banks.
  • The Nifty Realty and Nifty PSU Bank were the top performers among sectoral indices today as they cheered the rate-pause decision.
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The Indian equity markets recovered from early losses on Thursday after the Reserve Bank of India’s (RBI) surprise pause in rate hikes – that kept the repo rate unchanged at 6.50%, as against wide expectations for a 25 basis point (bps) hike.

“The MPC (Monetary Policy Committee) decided unanimously to keep the repo rate unchanged at 6.50% in this meeting of the MPC with readiness to act should the situation so warrant,” said RBI governor Shaktikanta Das.

Das, however, underlined that the MPC would not hesitate to raise repo rates in future meetings as the decision to pause the rate hike cycle was for this meeting only.

Since May 2022, India’s central bank has increased the repo rate by 250 basis points. Repo is the rate at which the central bank lends short-term funds to banks.

The equity markets went straight up after the RBI decision with the Sensex rising 146 points, or 0.25%, to 59,847 while the Nifty50 gained 40 points, or 0.23%, to hit 17,597.

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Moreover, Das also boosted confidence with his observations that while the world was going through a period of extreme uncertainty, India’s financial sector remained resilient and stable amid a daunting environment.

Nilesh Shah, managing director at Kotak Mahindra AMC, drew an analogy between RBI’s decision and cricket, especially the stroke play of batting maestro Sachin Tendulkar.

“The RBI’s pause is like Sachin stroke on a tricky pitch but with eyes set in and having the luxury of hitting the ball wherever he wanted. The RBI had the option of a rate hike or a pause. The pause was not entirely unexpected. The RBI will watch developments and data before taking the next call. The market expects the RBI to fetch maximum run and win the match on inflation and growth, no matter which direction they hit the ball,” said Shah.

Top gainers and losers on the Nifty50
Top gainers Change Top losers Change
State Bank of India1.90%ONGC-1.50%
Bajaj Finance1.73%HCL Technologies-1.01%
Adani Enterprises1.63%Nestle India-0.79%
IndusInd Bank1.55%Titan-0.66%
L&T1.16%Britannia Industries -0.65%
Source: NSE

Real estate stocks, PSU banks ride up after rate-pause decision
The Nifty Realty was among the top-performing sectoral indices today as the industry cheered the decision after being impacted by a deceleration in demand due to high inflation and rising interest rates.
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“Much against general expectations, the RBI decided to keep the repo rates unchanged at 6.5% today. This is indeed good for the residential real estate market, which faces a tough road ahead amid massive layoffs by large corporates the world over. India is not decoupled from global economic dynamics and their invariable impact on the housing uptake here. The RBI’s decision to keep the repo rates unchanged comes as a welcome respite to homebuyers,” said Anuj Puri, chairman at Anarock Group.

A recent report by real estate consultancy Knight Frank showed a decline in sales in the larger markets of Bengaluru and Mumbai, at -6% and -2% respectively in the first quarter of 2023.

The pause in rate hike particularly gives relief to affordable and mid-segment homebuyers who feared a possible rate hike today would have made property-buying via home loans even harder, said Puri.

After the continuous increase in interest rates pushed up the home loan rates over the past year, the industry expects cuts in interest rates going forward.

Nifty Realty was up 2.13% on Thursday after the monetary policy decision with Godrej Properties leading the rally with a 4% jump.
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Top performers on Nifty Realty % change
Godrej Properties4%
DLF2.83%
Oberoi Realty2.81%
Indiabulls Real Estate 2.41%
Sobha 1.87%
Source: NSE

The Nifty PSU Bank index also rode up 0.91% following the RBI’s decision. State Bank of India, Punjab National Bank and Bank of Maharashtra were among the top gainers in the index with more than 1.5% gains.

We are approaching area of many resistances on $NIFTY50.NSE charts for the next week. 1. 50 day average at 174782. 200 day average at 175153. Downward channel resistance at 175674. Upward sloping resistance line at 17668. #Nifty #Markets #India #trading

— (@Kushghodasara) April 02, 2023

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