RBI rate cut to give a consumption boost to automobiles, real estate and consumer durables, say experts

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The Reserve Bank of India's February 7 decision to cut the repo rate by 25 basis points to 6.25 percent is expected to give a boost to sectors like  automobiles, real estate and consumer durables, which have been been plagued by demand concerns amid high inflationary pressures.

"Looking ahead, healthy rabi prospects and an expected recovery in industrial activity should support economic growth in 2025-26. Among the key drivers on the

demand side, household consumption is expected to remain robust aided by the tax relief in the Union Budget 2025-26," RBI governor Sanjay Malhotra, who shared the outcome of his first monetary policy committee meeting, said while announcing the rate cut decision.

"The government’s pro-consumption fiscal measures—including tax relief in the FY26 Budget—are expected to stimulate demand, and now RBI has complemented this with lower borrowing cost," said Arsh Mogre, Economist Institutional Equities, PL Capital - Prabhudas Lilladher.

The MPC unanimously decided to cut the repo rate by 25 bps from 6.5 percent to 6.25 percent, Malhotra, who took over as the RBI chief in December, said.

Sectors like consumer durables, including companies such as Voltas and Havells, are expected to gain as financing costs drop, boosting sales of household goods, Ananth Rathi's Head of Research Narendra Solanki said.

"On the demand side, rural demand continues to be on an uptrend, while urban consumption remains subdued with high frequency indicators providing mixed signals. Going forward, improving employment conditions,  tax relief in the Union Budget, and moderating inflation,15 together with healthy agricultural activity bode well

for household consumption," Malhotra added.

In the December quarter, rural volume growth was pegged at 9.9 per cent nearly 2 times faster than that of urban volume growth at 5 per cent, according to Neilsen data reported in the media.