RBI Monetary Policy: Interest rate-sensitive sectors emerged as the biggest gainers on Friday after the Reserve Bank of India’s Monetary Policy Committee (MPC) unanimously decided to keep the repo rate unchanged at 5.25% while retaining its neutral policy stance.
The decision lifted investor sentiment across Dalal Street, with benchmark indices extending gains during the session. The Sensex rose more than 300 points to reclaim the 74,500 mark, while the Nifty 50 traded near the 23,500 level as investors welcomed policy stability amid heightened geopolitical uncertainty and inflation concerns.
Among sectoral indices, Nifty Realty led the rally with gains of nearly 2%. The Nifty Financial Services index advanced 1.3%, while Nifty Bank climbed 1% and Nifty Auto added 0.8%. Public sector lenders also attracted strong buying interest, with the Nifty PSU Bank index rising 1.7%, while the Nifty Private Bank index gained 0.7%.
Banks and Financials Lead the Charge
Banking stocks witnessed broad-based buying after the policy announcement. Within the Nifty Bank index, IndusInd Bank emerged as the top performer, rising 2%. YES Bank, Punjab National Bank and Canara Bank gained more than 1.5% each. Bank of Baroda, Union Bank of India and AU Small Finance Bank also advanced over 1%, while Axis Bank, State Bank of India, IDFC First Bank and ICICI Bank traded 0.5%-1% higher. HDFC Bank, Federal Bank and Kotak Mahindra Bank, however, remained in negative territory.
The financial services pack also saw strong participation. Bajaj Finance surged more than 3%, making it the top gainer in the segment. Max Financial, HDFC Life and REC gained over 2% each, while ICICI Lombard General Insurance, Shriram Finance, Cholamandalam Finance, PFC, SBI Life and Jio Financial Services rose between 1% and 2%.
“In Q4 banks reported a fairly strong quarter with credit growth having picked up meaningfully and asset quality metrics remaining resilient. As per the latest RBI print, credit growth has held up well at around 16% as on mid-May 2026. So far, asset quality has not been concerning, however, the impact of the prolonged war would start reflecting in late-Q2 FY27 or H2 FY27,” said Rajesh Palviya, Head of Research at Axis Direct.
Palviya noted that geopolitical uncertainty and pressure on margins remain key monitorables for the sector. According to him, competition for deposits and elevated cost of funds could keep net interest margin (NIM) pressures intact in the near term. He added that larger private sector banks could benefit more if the RBI opts for rate hikes in future meetings due to their higher share of external benchmark-linked lending rate (EBLR) portfolios.
“We would continue to remain selective in our stock selection approach and favour banks with diversified portfolios, a strong deposit franchise, adequate capitalisation and attractive valuations. Presently, we prefer ICICI Bank, Kotak Mahindra Bank and SBI amongst the larger banks and Federal Bank and Ujjivan SFB amongst the mid/smaller banks,” Palviya said.
Realty Stocks Outperform, Auto Sector Mixed
Real estate stocks delivered the strongest performance among rate-sensitive sectors. Almost every stock in the index traded higher except one. Prestige Estates rallied more than 3.5% to emerge as the top gainer, while Lodha and Phoenix Mills gained over 2.5% each. Godrej Properties and Oberoi Realty added more than 1.5%, while Anant Raj was the only notable laggard, declining over 1.5%.
“A pause in rates would help maintain favourable financing conditions for homebuyers and developers at a time when economic sentiment is being tested by global volatility. Stable borrowing costs are particularly important for sustaining demand in the residential market, where affordability remains a key consideration,” said Shishir Baijal, International Partner, Chairman and Managing Director, Knight Frank India.
Baijal added that while a weaker rupee could raise construction costs through imported materials and inputs, the continuation of a stable interest-rate environment should help offset those pressures by supporting buyer confidence and investment activity. He believes the RBI’s measured approach reflects confidence in the resilience of the domestic economy while retaining flexibility to respond to evolving global risks.
The auto sector also traded higher, although gains were not broad-based. Tube Investments of India rose 1.5%, while Exide Industries, Mahindra & Mahindra, Uno Minda and Bharat Forge gained more than 0.5% each. On the other hand, Hero MotoCorp, Bosch and TVS Motor Company declined over 0.5%.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
