Interest rate-sensitive stocks close with losses

Most of the interest rate-sensitive stocks closed with losses of up to 8.2 per cent on Wednesday even as the RBI slashed the benchmark lending rate. From the banking pack, RBL Bank plunged 8.16 per cent, SBI dropped 3.75 per cent, Axis Bank 2.77 per cent, Federal Bank 1.53 per cent, Kotak Mahindra Bank 0.58 per cent, ICICI Bank 0.49 per cent and HDFC Bank 0.19 per cent on the BSE.

The BSE bank index fell by 1.01 per cent to close at 31,375.87. Among auto firms, M&M dropped 5.62 per cent, Motherson Sumi Systems 4.69 per cent, Tata Motors 4.20 per cent, Ashok Leyland 3.70 per cent, TVS Motor 2.66 per cent, Maruti Suzuki 0.91 per cent and Bajaj Auto 0.28 per cent.

The auto index closed at 15,324.33, down 2.10 per cent. Some realty stocks also faced selling pressure, with Oberoi Realty falling 2.04 per cent, DLF 1.48 per cent, Godrej Properties 1.02 per cent, Sobha Limited 0.70 per cent and Omaxe Limited 0.41 per cent.

The realty index tumbled 1.38 per cent to close at 1,996.94. "In a slight deviation from earlier policies, RBI surprised by cutting the repo rate by 35 bps vis-à-vis expectations of a 25 bps rate cut, while maintaining an accommodative stance.

"So far RBI has reduced the repo rate by 110 bps which would benefit the demand in interest-sensitive sectors mainly real estate, automobile, consumer durables, etc as and when it is transmitted by the banking system," said Arun Thukral, MD and CEO, Axis Securities. The Reserve Bank of India (RBI) on Wednesday cut interest rate by a rare 35 basis points -- the fourth successive reduction -- to a nine-year low of 5.40 per cent in an attempt to boost an economy growing at its slowest pace in nearly five years.

"The 35 bps rate cut is higher than the consensus and our expectation of 25 bps rate cut. This clearly shows RBI's concern about growth performance and outlook and urgency to take measures to revive growth. "With 110 bps cumulative rate cuts, banks would be under moral pressures to cut lending rates which can depress NIM. This is negative for the sector and positive for interest sensitive sectors," said Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers.