Indian indices continued an upward trend after the Reserve Bank of India raised the repo rate by 50 bps to 5.40 percent on August 5 for the third consecutive time, as expected. The Repo rate is now back to pre-pandemic levels, the highest since August 2019.
Post the rate hike announcement, rate-sensitive stocks were trading mixed post the RBI announcement. While the Nifty Bank jumped over a percent and Nifty Realty rose 0.6 percent, Nifty Auto declined 0.15 percent.
"The 50 bp repo rate hike came 15 bp higher than the majority expectation of a 35bp hike. It is evident that the MPC is frontloading the rate hikes since it feels that CPI inflation is above comfort levels. The RBI governor went so far as to say that the Indian economy is holding steady in an ocean of turbulence. This positive view on the economy has been well received by the stock market in spite of the higher at hand expected repo rate hike," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Among banking stocks, IDFC First Bank, ICICI Bank, Federal Bank, SBI, Bank of Baroda and Axis Bank rose between 1-2.5 percent each while Punjab National Bank and AU Bank added over 0.5 percent each. However, Bandhan Bank and IndusInd Bank were the only 2 bank stocks in the red.
Financial stocks were also in the green. ICICI Prudential gained 3.5 percent followed by Chola Finance, up 3 percent and Muthoot Finance, up 1.8 percent. Piramal Enterprises, HDFC Life, REC and Shriram Transport Finance also gained between 0.5 percent and 1.5 percent each.
Among auto stocks, Balkrishna Industries fell the most, down 6 percent while Maruti Suzuki, Hero Moto, Ashok Leyland, Eicher Motors also lost between 0.5-1 percent each. Meanwhile, TVS Motor, Tata Motors, Exide Industries and Amara Raja Batteries were in the green.
Whereas, in the Nifty Realty index, Indiabulls Real Estate jumped the most, up 2 percent. Lodha, Sobha and Prestige Estates also rose over a percent each while Brigade Enterprises, Phoenix, and Sunteck Realty were trading in the red.
"Going forward, govt thrust on capital expenditure should crowd out private investment. RBI surveys show capacity utilisation is rising. Prospects for agri have brightened. There is some loss of momentum for growth due to global factors," stated Das. RBI sees FY23 GDP growth at 7.8 percent.