RBI MPC Meeting: Rate-sensitive sectors witnessed strong buying interest on Wednesday after the Reserve Bank of India (RBI) kept policy rates unchanged and raised its economic growth forecast for FY27. The Nifty Auto index touched a fresh record high, while the Nifty Realty index surged more than 2.5% during intraday trade on the National Stock Exchange (NSE).
However, benchmarks Sensex and Nifty 50 continued to exhibit divergent movements for the third consecutive session on Wednesday, 5 August. The Sensex jumped over 600 points, or nearly 1%, during the session, while the Nifty 50 declined by 0.20%.
The RBI’s Monetary Policy Committee (MPC) kept the repo rate unchanged at 5.25%. It also retained the Standing Deposit Facility (SDF) rate at 5%, while the Marginal Standing Facility (MSF) rate and the bank rate remained unchanged at 5.5%.
RBI Governor Sanjay Malhotra said underlying inflation has remained under control for some time and is expected to converge with headline inflation by the end of the current financial year.
He added that economic growth continues to be supported by resilient domestic demand, sustained expansion in manufacturing and services activity, and robust exports, reaffirming India’s position as the world’s fastest-growing major economy.
“The Indian economy has remained resilient amidst persisting global headwinds. High-frequency indicators available so far point towards steady domestic demand in Q1:2026-27. Private consumption remained robust. Investment continues to be resilient, as suggested by various indicators related to construction, capital goods and bank credit. External demand also sustained, as healthy expansion in services exports was complemented by a rebound in merchandise exports,” RBI said in its monetary policy statement, 2026-27.
The central bank also revised its FY27 GDP growth forecast upwards to 6.7% from 6.6%, signalling confidence in the domestic economy. At the same time, it lowered its FY27 Consumer Price Index (CPI) inflation projection to 5% from 5.1%.
“As widely expected, the MPC unanimously decided to hold the repo rate unchanged at 5.25% and retain the neutral stance. The slight surprise element was the upward revision in GDP growth for FY27 to 6.7% from 6.6% earlier and the downward revision in CPI inflation for FY27 to 5 per cent from 5.1% earlier,” said V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.
He added that according to the Governor, the rationale for holding the rates is the resilience of the Indian economy and benign core inflation. The policy is positive for stock markets. Bond yields are stable.
Auto and realty stocks lead the rally
The Nifty Auto index climbed 1.5% to a record high of 29,489.2 during intraday trade, surpassing its previous lifetime high of 29,179.10 recorded on January 5, 2026. All constituents of the Nifty Auto index traded in positive territory.
Bosch emerged as the top gainer, rallying more than 5%. Exide Industries, Ashok Leyland, Hero MotoCorp and Samvardhana Motherson International gained between 2% and 3%. Apollo Tyres, MRF, Bharat Forge, TVS Motor and Mahindra & Mahindra also advanced more than 1%.
The Nifty Realty index also gained momentum, rising 2.6% to an intraday high of 915.10. Shares of Raymond and Godrej Properties jumped 5%, while DLF, Prestige Estates Projects, Lodha Developers and Oberoi Realty gained around 3% each.
Anuj Puri, Chairman of ANAROCK Group, said the unchanged policy rate provides stability at a time of macroeconomic uncertainty. However, he noted that while the decision supports market confidence, it may not be sufficient to revive demand in the mass housing segment.
Shishir Baijal, International Partner, Chairman and Managing Director of Knight Frank India, said a stable interest rate environment is expected to strengthen buyer confidence, provide greater certainty for businesses and investors, and ensure continued access to affordable financing. He added that policy continuity should sustain housing demand and investment across residential and commercial real estate while supporting the sector’s long-term growth.
PSU banks outperform while private lenders remain under pressure
Despite the positive market reaction in rate-sensitive sectors, banking stocks witnessed a mixed performance.
The Nifty Bank index slipped 0.6% from its intraday high to a low of 57,593.90.
In contrast, the Nifty PSU Bank index rose 1.4% to 8,597.85. Bank of Maharashtra, Union Bank of India, Bank of Baroda, Indian Bank, Bank of India, Canara Bank and UCO Bank gained between 1% and 2%.
However, the Nifty Private Bank index declined 0.31%, weighed down by losses in Federal Bank, Axis Bank and HDFC Bank, which fell by up to 1%.
Commenting on the banking sector, Dnyanada Vaidya, Research Analyst – BFSI at Axis Direct, said banks delivered resilient earnings during the seasonally weak first quarter despite margin pressures. He noted that strong credit growth, contained credit costs, modest operating expense growth and stable asset quality supported performance.
He also highlighted robust mobilisation of FCNR(B) deposits, which is expected to aid deposit growth in the second quarter.
According to Vaidya, margins are likely to remain largely range-bound in the near term, with any improvement driven by a favourable portfolio mix. She continues to prefer banks with strong earnings visibility, healthy balance sheets and attractive valuations, including Kotak Mahindra Bank, ICICI Bank, SBI, Federal Bank and Ujjivan Small Finance Bank, while Bajaj Finance, Shriram Finance and CreditAccess Grameen remain her preferred picks among NBFCs.
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