Moneycontrol
Last Updated : Dec 05, 2018 04:02 PM IST | Source: Moneycontrol.com

Banks, realty, auto, NBFC stocks extend losses after RBI holds rates, cuts inflation forecast

The Reserve Bank of India has retained repo rate, at which banks borrow short-term funds from the RBI, at 6.5 percent.

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Banks, auto and realty stocks, which always known as rate sensitive, saw selling pressure on Wednesday after the Reserve Bank of India maintained status quo on policy rates and slashed its inflation forecast.

The Nifty Bank index dropped 0.6 percent, Realty down 0.6 percent and Auto plunged 2.3 percent amid RBI move.

IDFC Bank, IndusInd Bank, Yes Bank, ICICI Bank, PNB, Federal Bank, Axis Bank and Kotak Mahindra Bank were down 1-3 percent while Sobha, Oberoi Realty, Phoenix Mills, Sunteck Realty and Brigade Enterprises slipped 1-3.5 percent.

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All stocks available in the Auto index were also under pressure. Ashok Leyland, Tata Motors, M&M, Eicher Motors and Maruti Suzuki declined 2-5 percent.

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The Reserve Bank of India has retained repo rate, at which banks borrow short-term funds from the RBI, at 6.5 percent.

"Consequently, the reverse repo rate under the liquidity adjustment facility remained at 6.25 percent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 percent, the apex bank said.

"Consequently, the reverse repo rate under the liquidity adjustment facility remained at 6.25 percent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 percent, the apex bank said.

The RBI further said while the decision on keeping the policy rate unchanged was unanimous, Ravindra H Dholakia voted to change the stance to neutral.

While keeping the policy stance at 'calibrated tightening', the Monetary Policy Committee reiterated its commitment to achieving the medium-term target for headline inflation of 4 percent on a durable basis.

The RBI slashed its inflation forecast to 2.7-3.2 percent for second half of FY19 (against 3.9-4.5 percent earlier) and expects inflation at 3.8-4.2 percent in first half of FY20 assuming a normal monsoon in 2019.

The above inflation projection decided by the central bank after considering given food group slipping into deflation, increase in inflation in non-food groups, sharp fall in crude oil prices, rupee appreciation, and the effect of the 7th Central pay commission's HRA increase.

"The reduction in inflation forecast should have ideally lead to lesser hawkish monetary policy. As the shift in policy stance was done in the last meeting it was difficult for RBI to reverse the same," Abhimanyu Sofat, Head of Research, IIFL Securities told Moneycontrol.

According to him, if one sees continued benign data on inflation front, then one can hope for increased liquidity from RBI going forward to support credit growth.

The apex bank has maintained its GDP growth forecast for 2018-19 at 7.4 percent (7.2-7.3 percent in second half FY19) and 7.5 percent for first half of FY20, with risks somewhat to the downside.

Non-banking finance companies' stocks, which come under Nifty Financial Services index that last 0.3 percent, were also under pressure. Barring Edelweiss Financial (up 3 percent), HDFC (up 1.75 percent) and HDFC Bank (up 0.65 percent), all other stocks were trading in the red.

M&M Financial, Indiabulls Housing Finance, Bajaj Finserv, Shriram Transport, Bajaj Finance, IIFL Holdings and Bharat Financial were down 1-5 percent.

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First Published on Dec 5, 2018 02:46 pm
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