Interest rate-sensitive sectors reacted positively after the Monetary Policy Committee of the unanimously cut the by 25 basis points to 5.25% and retained its neutral stance.
After opening on a weak note, the Nifty Bank index reversed course and climbed 0.65% in intra-day trade, while the Nifty Auto gained 0.4% and the Nifty Realty advanced 1.5%. The Nifty Financial rose 0.7%, supported by buying interest across lenders, with the Nifty PSU Bank up 1.2% and the Nifty Private Bank higher by 0.7%.
“Rate-sensitives like banks, autos and real estate can see near-term strength, while equities more broadly should respond positively but remain stock-selective given widening earnings dispersion. The policy message is continuity and steady normalization, and markets will trade around that clarity,” said Sonam Srivastava, founder and fund manager at Wright Research PMS.
Ravi Singh, chief research officer at Master Capital Services, echoed a similar sentiment.
“For the equity market, the policy is constructive… rate-sensitive sectors like banks, NBFCs, autos and real estate stand to benefit from a better demand outlook and stronger earnings visibility. By retaining a neutral stance, the RBI has kept the door open for further calibrated easing while maintaining macro stability amid a broadening economic recovery,” he said.
Inflation, GDP growth
RBI Governor Sanjay Malhotra announced the rate-cut decision on Friday, calling attention to record-low inflation. He noted inflation at a benign 2.2% and GDP growth at 8% for the first half of the year, describing the moment as a rare “Goldilocks” phase. The RBI also raised its FY26 GDP growth estimate to 7.3% from 6.8% and lowered the FY26 CPI inflation projection to 2% from 2.6%.
The cut surprised many as most experts expected the central bank to hold rates in December. Nine of 13 economists polled by Mint anticipated a pause, while four expected a 25-basis-point reduction. In October, the MPC kept the repo rate unchanged at 5.50%, raised FY26 growth estimates to 6.8%, and cut inflation forecasts to 2.6%.
Following the policy announcement, Indian stock markets, which opened on a flat note on Friday, extended their upward momentum. The Sensex gained 257.68 points, or 0.3 per cent, to reach the day’s high of 85,522.97.
The Nifty 50 rose 80 points, or 0.3 per cent, to 26,113.85. Broader market indices, including midcap and smallcap stocks, underperformed the benchmarks, dropping 0.5 percent and 0.9 percent, respectively.
Banks and Financial Services Shine
Within the Nifty Bank index, most stocks traded positively. Punjab National Bank led the gains, rising over 1%, followed by AU Small Finance Bank, IDFC First Bank, SBI and Canara Bank, which added more than 0.5% each. Federal Bank, IndusInd Bank and Axis Bank were the only three stocks in the red.
“The projection of 7.3% GDP growth for FY 26 is positive for the market. Banks will like the policy decision overall but are unlikely to respond very positively to the rate cut since their NIMs (net interest margins) will come under pressure and they will face difficulties in mobilising deposits if deposit rates are lowered,” said VK Vijayakumar, chief investment strategist at Geojit Investments Ltd.
In the financial services space, SBI Cards, Bajaj Finance and Shriram Finance led the rally with a 2% increase each. Bajaj Finserv and SBI Life followed closely, both rising over 1%.
MCX, Chola, Muthoot and ICICI Pru also rose over 0.5%. However, HDFC AMC, LIC Housing, REC and HDFC Life fell between 0.5–1% each.
Strong Performance by Auto & Realty Sectors
While the auto sector rose, its constituents were mixed. Maruti Suzuki and Eicher advanced about 1%, while Bosch, Mahindra & Mahindra and TVS Motor gained about 0.5%. However, Apollo Tyres shed 1%, and Exide, Balkrishna and Tata Motors fell over 0.5% each.
In the realty sector, Prestige Estates emerged as the top gainer, rising over 1.5%, while Signature Global and Oberoi Realty gained more than 1%. DLF and Lodha added over 0.5% each. However, Anant Raj fell over 1%, and Brigade and Phoenix were also in the red.
“The rate cut acts as a strong signal of policy support for the real estate sector and the broader economy. However, for the intended benefits to materialize, the transmission of the reduced rates must also be faster, ultimately benefiting the real estate sector and contributing positively to overall economic expansion,” said Ramani Sastri, chairman & MD of Sterling Developers.
A supportive interest-rate environment will play a crucial role in sustaining homebuyer confidence in the coming year. As long as the macro fundamentals are stable, demand for real estate will continue to grow and supportive monetary policy will only accelerate its upward trajectory, he said.
“The Indian real estate market is booming and being a part of its growth can extend favourable returns in the future,” Sastri said.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.