Source: ZeeBusiness
In a move that pleasantly surprised the Street, the Reserve Bank of India’s Monetary Policy Committee (MPC) slashed the repo rate by 50 basis points on Friday, June 6, pushing rate-sensitive stocks into sharp recovery mode. The repo rate now stands at 5.5 per cent, compared to 6 per cent earlier. The central bank also shifted its stance from 'accommodative' to 'neutral', signaling a broader reset in policy outlook amid signs of economic fatigue.
Following the rate cut, banking, non-banking financial companies (NBFCs), real estate, and auto stocks witnessed strong buying interest in early trade. At 10:20 am, the Nifty PSU Bank index was up one per cent, outpacing gains in private banking and financial services stocks. Nifty Realty surged two per cent, while the Nifty Auto index rose 0.3 per cent.
Investors believe the cut will reduce borrowing costs, boosting demand for housing and vehicles while also improving margins for lenders. This momentum is expected to benefit both banks and NBFCs, which have been facing margin pressure due to higher cost of funds over the past year.
This was the RBI’s second consecutive rate cut in FY26. After reducing the rate by 25 basis points during the April policy meet, the central bank opted for a stronger move this time, citing a slowdown in consumption and investment.
"Demand conditions continue to soften, visible in slowing credit growth, weaker real estate and auto sales, and muted household wages," the MPC noted. It also added that inflation is under control, hovering below the 4 per cent mark on a three-month moving average basis for both headline and core components.
The switch in policy stance to ‘neutral’ signals that the RBI may pause to assess the impact of these cuts before taking further action. However, analysts expect more easing if growth indicators continue to falter.
“Today’s cut and the change in stance suggest the RBI is frontloading support to ensure a soft landing. It’s a prudent move given the slack in capex and consumption,” a fund manager tracking macro policy said.
With repo rate now at its lowest in nearly two years, market participants expect banks to reduce lending rates soon, boosting retail loan growth and demand for high-value purchases like homes and cars.
Experts also point out that the RBI’s recent record dividend payout of Rs 2.69 lakh crore has given the government ample room for fiscal push, which when combined with monetary easing, could support broader economic recovery.
For investors, the rate-sensitive segments particularly banking and realty are expected to see further upside in the near term as policy transmission kicks in. Analysts advise tracking how fast banks cut their lending rates and whether credit offtake improves from current levels.
In conclusion, Friday’s move by the RBI has not only delivered a short-term sentiment boost to Dalal Street but has also set the stage for a potential re-rating in rate-sensitive sectors—provided macro indicators respond positively in the coming quarters.
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