The Reserve Bank of India (RBI) held its benchmark repo rate unchanged at 5.5% in its August 2025 policy review, maintaining a neutral stance amid global trade uncertainties and cautious inflation projections. While the move was widely anticipated, it triggered a broad-based decline in interest rate-sensitive sectors, including automobiles, real estate, and banking, as investors recalibrated expectations for monetary easing.
Policy Highlights
- Repo Rate: Held steady at 5.5%
- Inflation Forecast: Revised down to 3.1% for FY26
- GDP Growth Projection: Retained at 6.5%
- RBI Governor Sanjay Malhotra emphasized resilience in domestic growth but flagged risks from global trade tensions and seasonal inflation pressures.
Sectoral Impact
Auto Stocks
The BSE Auto index fell 0.85%, with notable declines in:
- Bosch: -4.85%
- Hyundai Motor India: -1.95%
- HeroMoto Corp: -1.31%
- Apollo Tyres: -1.07%
- Mahindra & Mahindra: -0.83%
While Bajaj Auto (+0.11%) and Eicher Motors (+0.03%) managed marginal gains, the overall sentiment remained weak due to rising fuel costs and lack of rate relief.
Realty Stocks
The BSE Realty index dropped 2.11%, led by:
- Prestige Estates: -2.68%
- DLF: -2.65%
- Godrej Properties: -2.42%
- Phoenix Mills: -2.40%
- Brigade Enterprises: -2.27%
Developers faced selling pressure as hopes for lower borrowing costs faded, impacting demand outlook and project financing.
Banking & Financials
The BSE Bankex slipped 0.04%, with mixed performance:
- IndusInd Bank: -2.58%
- IDFC First Bank: -1.34%
- Bank of Baroda: -0.46%
- Axis Bank: -0.16%
- SBI: -0.02%
Meanwhile, ICICI Bank (+0.22%) and HDFC Bank (+0.18%) posted modest gains. Financial services stocks like SBI Cards (-2.16%) and Jio Financial Services (-1.98%) also declined.
Market Sentiment
The RBI’s cautious tone and lack of forward guidance for rate cuts disappointed investors. Broader indices reflected the mood:
- Sensex: Down 80.99 points to 80,629.26
- Nifty 50: Down 75.35 points to 24,574.20
- Midcap & Smallcap indices: Fell 0.8% and 1.1%, respectively
Geopolitical tensions, including tariff threats from the U.S., added to the pressure on export-driven sectors like IT and Pharma.
Conclusion
The RBI’s decision to hold rates steady underscores its wait-and-watch approach amid global headwinds. While the economy remains resilient, the muted response from rate-sensitive sectors signals investor caution. Until clearer signals emerge on inflation and trade, markets may remain range-bound, with selective opportunities in defensives and quality financials.
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