Rate-sensitive realty finnacials auto stocks slip as RBI holds rates steady at 5.5%, sticks to ‘neutral’ stance

The Reserve Bank of India (RBI) kept the repo rate unchanged at 5.5 per cent in its August 2025 policy review, in line with market expectations. While the status quo came as no surprise, rate-sensitive sectors like banking, auto, NBFCs, and real estate reacted mildly negative in Wednesday's trade.

Muted response from rate-sensitive sectors

Following the policy announcement, the Bank Nifty index dipped marginally, while Nifty Auto and Nifty Realty fell between 0.4 to 0.8 per cent. Broader financials also witnessed dull sentiment as traders booked profits after recent rallies driven by rate-cut expectations.

Analysts say the RBI’s decision to retain its ‘neutral’ policy stance, coupled with a cautious growth-inflation outlook, has left little room for further rate action in the near term. “A neutral stance with no rate cut signals a cautious RBI. It wants to watch inflation dynamics and global cues before acting again. This has kept rate-sensitive sectors in a wait-and-watch mode,” said a fund manager tracking banking and real estate stocks.

Auto stocks lose momentum

Auto stocks were among the top laggards post-policy. The Nifty Auto index lost nearly 0.5 per cent with stocks like M&M, Bajaj Auto, and Maruti Suzuki trading lower. While vehicle demand remains robust, rising fuel prices and no fresh monetary easing weighed on sentiment.

Realty under pressure despite softening inflation

Despite the RBI lowering its FY26 CPI inflation forecast to 3.1 per cent (from 3.7 per cent earlier), real estate stocks failed to cheer. The Nifty Realty index fell close to 1 per cent as expectations of rate cuts in the near term faded. Developers like DLF, Godrej Properties, and Prestige came under selling pressure.

Financials consolidate after recent rally

The Nifty Financial Services index held relatively steady with a mild downward bias. Shares of HDFC Bank, ICICI Bank, and Bajaj Finance traded flat to lower. NBFCs and housing finance companies, which typically benefit from softer rates, saw limited gains.

What RBI said: Key takeaways

RBI Governor Sanjay Malhotra reiterated that domestic growth was resilient, but inflation pressures, especially in the latter half of FY26, needed monitoring. He projected retail inflation at 4.4 per cent for Q4 FY26 and 4.9 per cent for Q1 FY27.

On the growth front, the central bank retained its FY26 GDP growth forecast at 6.5 per cent, suggesting no material downside risks at present.

While the RBI’s policy was broadly in line with market expectations, the lack of forward guidance for further easing led to a muted reaction in rate-sensitive pockets. Analysts believe these sectors may remain range-bound in the near term unless macro signals shift decisively towards further rate action.