Rate Sensitive Stocks Fall as RBI Keeps Rates on Hold

Interest rate sensitive stocks like banking, real estate and auto fell on Tuesday after the Reserve Bank of India held key lending rate (repo rate) at 7.5 per cent.

The Bank Nifty fell over 1 per cent, CNX Auto, NSE's benchmark index for auto companies fell nearly one per cent, and the realty index of National Stock Exchange, CNX Realty fell over 2.5 per cent. IDFC, Tata Motors, DLF and Axis Bank were among the top losers.

Banks, auto and realty stocks would have been the prime beneficiaries if RBI would have cut the interest rates today.

Even after two consecutive rate cuts by RBI in this year so far, banks have not yet cut their lending rates due to which the economy is yet to take the benefit of the rate cuts.

Some analysts were also expecting the RBI to cut the cash reserve ratio (CRR), the percentage of deposits which the banks are required to keep as a security with the central bank. Currently the CRR is at 4 per cent.

However, the RBI did not cut the CRR which added steam to the selling.

The Bank Nifty closed 0.73 per cent lower, the CNX Realty index shed 1.67 per cent. However, the auto index witnessed some pull back and ended marginally in green.