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Shares of rate-sensitive stocks – banks and NFBCs – rallied up to 4% on Wednesday morning after the Reserve Bank of India (RBI) changed its policy stance to ‘neutral’ from ‘withdrawal of accommodation’ earlier.
Following a three-day meeting of the monetary policy committee (MPC), RBI Governor Shaktikanta Das maintained the repo rate at 6.50% for the tenth straight time but changed his position.
In his policy speech, Das highlighted that certain NBFCs are seeking development without risk management, but underlined that overall NBFC sector was healthy.
The shift in stance is being interpreted as a step towards the start of a rate cycle in December. NBFC shares led the gains, as at the start of a rate lowering cycle, NBFCs benefit more than banks.
Shriram Finance was the top gainer in Nifty and was up over 4%. Other NBFCs Cholamandalam Investment and Bajaj Finance were up around 3% each. Nifty Bank was also up around 1%, with Axis Bank, SBI, PNB, and ICICI Bank leading the gains with an upside of 2-3% each.
Other rate-sensitives like auto and real estate stocks also rallied up to 6% post the announcement.
“This change in RBI’s stance opens the door for possible interest rate cut in December or February, assuming no inflationary shocks from exogenous factors like Oil. Despite no significant shifts in growth or inflation forecasts, the policy is rightly being aligned with global central banks, rather than focusing solely on food inflation,” said Amar Ambani of YES Securities.
However, he said any cuts over the next year are expected to be modest at around 50 basis points, as the RBI has informally indicated a preferred real interest rate range of 1.5-1.9%.
At the end of a 3-day meeting of the monetary policy committee (MPC), RBI Governor Shaktikanta Das maintained the repo rate at 6.50% for the 10th consecutive time but changed the stance.
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