Shares of rate-sensitive sectors like banking, finance, auto, and real estate fell as much as 8% after the Reserve Bank of India’s (RBI) policy decision.

The RBI on Thursday left the repo rate unchanged at 6.50% following the conclusion of its three-day monetary policy meeting. This is the sixth consecutive time the central bank has left policy rates untouched and the longest pause in rates since 2008 in a rising interest rate environment.

“The RBI policy is more of a non-event as nothing new was mentioned in it. India 10-year bond yields spiked from the lows of 7.04% to 7.09% as the governor kept on emphasizing that RBI will watch out for inflation to cool off below 4% for them to be comfortable with rate cuts,” said Apurva Sheth, Head of Market Perspectives and Research, SAMCO Securities.

Following the RBI policy decision and rise in bond yields, shares of PSU bank stocks fell as much as 8%.

Also Read | India bond yields reverse early fall as cenbank policy disappoints

Indian Overseas Bank plunged 8%, and UCO Bank declined by more than 7% in Thursday’s trade. Central Bank of India, Punjab & Sind Bank and Bank of Maharashtra fell 4-6%. Meanwhile, private sector banks, such as Axis Bank, ICICI Bank, Kotak Bank and HDFC Bank dropped by 1-3%.Meanwhile, shares of automobile players like Maruti Suzuki, Eicher Motors, M&M and Tata Motors declined up to 2% after RBI’s policy announcement.Shares in other rate-sensitive real estate sectors also fell by up to 4%. Brigade Enterprises, Shobha, Godrej Properties, Lodha and Prestige Estate Projects declined 1-4%.

The Monetary Policy Committee of the central bank also retained its stance of remaining focussed on the “withdrawal of accommodation.”

Despite the monetary policy action being on expected lines, the equity market tumbled. Sensex lost over 700 points while Nifty slipped below the 21,750 mark.

Unlike in the previous meeting, the decision to leave rates unchanged this time was favoured by 5 of the 6-member MPC panel.

“These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth,” RBI said in its policy statement.

In addition, the central bank also left its inflation forecast for FY24 unchanged at 5.4%, despite food price rise concerns and uncertainty around crude cost. On the growth front, the MPC has forecast the Indian economy to grow at 7% in FY25. The growth rate for Q1, Q2, Q3 and Q4 in FY25 were projected at 7.2%, 6.8%, 7% and 6.9% respectively.

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