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Rate-sensitive Stocks Take a Beating After RBI’s Rate Cut; PSU Banks Hit the Most

Image for representation.

Image for representation.

The BSE Capital Goods Index declined 2.8%, followed by BSE Bankex (down 2.34%), BSE Realty (down 1.84%) and BSE Auto (down 1%).

Rate-sensitive stocks got hammered on Thursday after the monetary policy committee (MPC) of the Reserve Bank of India (RBI) cut the key policy rate by 25 basis points. Realty, capital goods and banking stocks were among the biggest losers on stock exchanges. The broader markets also extended losses, with the S&P BSE Sensex closing down points 554 points, or 1.4%, to 39,529.72, while the Nifty 50 index falling 178 points or 1.5% to 11,843.75. Investors booked profits after the rate cut as markets had already factored in a 25 basis points reduction and was probably hoping for a surprise.

The BSE Capital Goods Index declined 2.8%, followed by BSE Bankex (down 2.34%), BSE Realty (down 1.84%) and BSE Auto (down 1%).

Stocks of public sector banks fell sharply, with the Nifty PSU Banking index down 4.9%. RBI said on Thursday that it will issue a revised circular on bad loan recognition within the next three-four days, replacing the 12 February circular that was struck down by the apex court. On 2 April, the Supreme Court had declared as "ultra vires" the February circular that mandated banks to label even a day’s default as non-performing asset (NPA).

State Bank of India (SBI) declined 4.3%, Allahabad Bank was down 7.4%, Bank of Baroda tumbled 6.9%, Bank of India cracked 6.5%, Canara Bank fell 5.1%, while PNB dropped 3.5%.

Among the private banks, IndusInd Bank was down 7%, Yes Bank fell 6.1%, ICICI Bank dropped 1.8%, Axis Bank was down 1.4%, Kotak Mahindra Bank slipped 1.2%, while HDFC Bank shed nearly 1% .

Among capital goods stocks, Larsen and Toubro Ltd (L&T) dropped 3.4%, Bharat Electronics Ltd fell 5.5% , BHEL slipped 3.5% and ABB was down 2.1% .
Auto stocks were mixed. While MRF, Tata Motors, Mahindra and Mahindra (M&M) and Ashok Leyland lost 2-3%, Hero Motocorp, Bajaj Auto and Eicher Motors closed in the green, rising up to 1%.