Rate-sensitive stocks in focus as RBI keeps key interest rates unchanged; banks, realty rise, auto under pressure

RBI, Policy, The Central Bank is likely to maintain the status quo on key policy rates in its next bi-monthly economic policy, in view of inflationary concerns.

Rate sensitive stocks traded flat as The RBI MPC has voted unanimously to keep policy repo rate unchanged at 4 percent in view of inflationary concerns.

Reverse repo rate was also unchanged at 3.35 percent. The 'accommodative' stance will continue as long as needed, Governor Shaktikanta Das announced on February 10.

The MPC has held the key repo rate at record lows since May 2020 and reiterated time and again.

"We have made effort to limit disruption to economic activity. While CPI edged higher, it is along expected lines. Core inflation remains elevated and headline inflation is expected to peak in Q4FY22, and turn moderate in H2GY23. Continued policy support is warranted for durable, broad-based recovery," the Central Bank Governor said.

Retail inflation accelerated to a five-month high of 5.59% in December from a year earlier, while wholesale price-based inflation, a proxy for producer prices, marginally eased to 13.56%, but remained in double-digits for nine straight months.

Among the sectors, the auto index was trading in the red at 10:20 hours dragged by Maruti Suzuki, Hero MotoCorp, M&M, Ashok Leyland and Bosch while Tata Motors, TVS Motor and Eicher Motors were trading in the green.

Nifty Bank on the other hand edged higher led by gains from Kotak Mahindra Bank, Axis Bank, HDFC Bank and State Bank of India while PNB< Federal Bank and Bandhan Bank were under pressure.

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Realty stocks were also in focus and managed to stay in the green. The top gainers included Lodha Sobha, Sunteck Realty and Godrej Properties adding 0.5-1 percent each while Prestige Estates, Brigade Enterprises and Indiabulls Real Estate were trading in the red.

According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, RBI has again voted for growth by continuing the accommodative stance and retaining the current repo and reverse repo rates. Even though this might invite criticism of the central bank being behind the curve, the RBI governor has categorically communicated that "continued policy support is warranted for a durable and broad-based recovery. This clear pro-growth stance is desirable at the current juncture.

Market has responded positively to the policy as of now with banking stocks exhibiting strength. However, the short to medium- term trend of the market is likely to be influenced by the inflation data in US expected late tonight, he said.

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