Shares of auto companies and banks either maintained their gains or climbed further after the Reserve Bank of India hiked repo rate – the rate at which RBI lends to banks – by 50 basis points to 5.40 percent.
The policy rate is the highest since August 2019.
ICICI Bank climbed 1.5 percent, IDFC First Bank 1.4 percent, SBI 1 percent and Axis Bank 0.78 percent. Nifty Bank was up 0.72 percent.
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Nifty Auto was down marginally largely due to selling in auto component makers Balkrishna Industries and Sona Comstar. TVS Motor, M&M, Escorts, and Bharat Forge traded in the green.
Nifty Realty, which is also sensitive to interest rates, rose 0.41 percent. Shares of Macrotech Developers, Sobha, DLF, Godrej Properties and Oberoi Realty advanced up to 1.5 percent.
"The hike by 50 bps is definitely on the higher side, and home loan lending rates will now edge further into the red zone," said Anuj Puri, Chairman – ANAROCK Group. "This whammy comes along with the inflationary trends of primary raw materials, including cement, steel, labour, etc., that have recently led to a rise in property prices. Together, these factors will impact residential sales."
It is a sign that investors have shrugged off the rise in interest rate, even though it will result in higher EMIs on loans, as Sensex and Nifty maintained their morning gains. Sensex was up 0.36 percent at 58,508 while Nifty was up 0.34 percent at 17,440.
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