Banking, Auto, Realty Stocks Jump on RBI Rate Cut

NSE's banking sub-index, Bank Nifty surged nearly 2 per cent to an intraday high 20,330.45 on Wednesday after the Reserve Bank of India surprised the Street by cutting the lending rates (repo rate) by 25 basis points in an inter-meeting cut.

Banks will be the prime beneficiary of the rate cut as this will lower the deposit cost of the banks.

Punjab National Bank, SBI, Bank of Baroda and Kotak Mahindra Bank were trading higher by 2.5-3.5 per cent each.

Rajiv Lall, executive chairman at IDFC told NDTV that "The rate cut was largely unanticipated by market. Long term rates will come down now, once that happens banks will start passing on the rate cut to borrowers."

Banks have been struggling for past few years as the credit growth was not picking up and high amount of non-performing assets eroded their balance sheet.

Analysts believe this rate cut will help them in reviving the credit growth as soon as banks start lowering borrowing rates.

Analysts believe the rate cut will also help in easing the bad loan pressure of banks as for existing corporate loans the lending rate will come down which will reduce the interest liability of the corporates.

Other rate sensitive stocks like auto and realty jumped saluting the RBI's move. CNX Realty, NSE's index for realty stocks jumped over 2 per cent, while the auto index gained nearly 1 per cent as this rate cut will translate into higher revenue for auto and realty stocks.