The Reserve Bank of India delivered a quarter-sized rate cut, the first in almost five years and just like the markets anticipated. Given that the market had already priced in a rate cut from the Indian central bank, the RBI outcome failed to spark strong gains for the benchmarks-- the Sensex and Nifty.
Rate-sensitive sectors like banking, automobiles, real estate and consumer durables also witnessed similar activity, with positive knee-jerk reactions to the rate cut fizzling out quickly. Following an initial uptick, rate-sensitive sectors like Nifty Bank, Nifty Realty, and Nifty Auto slipped into losses while Nifty Consumer Durables remained an outlier, with marginal gains.
Consumer stocks saw a mixed trend. Despite higher liquidity increasing the cash in consumers' hands, the Nifty FMCG index was in the red, tumbling over one percent. However, discretionary stocks traded higher as the Nifty Durables index was higher by 0.2 percent.
Sectors like consumer durables, including companies such as Voltas and Havells are expected to gain as financing costs drop, boosting sales of household goods, said Ananth Rathi's Head of Research Narendra Solanki.
The Nifty Auto index reversed early gains and traded flat, with Apollo Tyres, and M&M leading the upmove.
Follow our market blog to catch all the live action
"The auto sector will be among the first beneficiaries, with two-wheelers leading the pack, followed by budget-friendly car manufacturers like Maruti," Solanki said. Lower loan rates will encourage consumer spending in both rural and urban market, which could help two-wheeler stocks like Hero MotoCorp and TVS Motors to gain.
International brokerage Morgan Stanley noted that lenders with higher fixed-rate assets and floating- rate borrowings to benefit from the RBI's rate cut.
Further, unsecured lenders, vehicle financiers, and gold financiers to gain, while housing finance companies may be at a disadvantage from the first cut in the repo rate over five years ago.
On the stock front, M&M Financial Services and SBI Cards are top beneficiaries, while LIC Housing Finance is likely to be negatively affected.
Morgan Stanley is overweight on PNB Housing Finance, which is its top pick, Shriram Finance and Bajaj Finance. Housing finance companies with limited interest rate sensitivity should outperform most lenders in growth & asset quality, such as PNB Housing Finance, Home First Finance, and Aptus Value Housing Finance India.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
