Nifty Bank Slides Over 350 Points, Banking Stocks Fall Up To 2% As RBI Cuts Repo Rate
Following the RBI’s decision to cut the repo rate by 25 basis points to 6%, rate-sensitive banking stocks witnessed notable declines
Banking Stocks Decline: Following the Reserve Bank of India’s decision to cut the repo rate by 25 basis points to 6%, rate-sensitive banking stocks witnessed notable declines. The Nifty Bank index dropped by over 350 points, reflecting investor concerns over narrowing interest margins for banks. Rate cuts, while generally positive for credit growth, can temporarily weigh on bank profitability, particularly for lenders with higher exposure to fixed-rate assets or narrow spreads. As a result, several major banking stocks fell by up to 2%.
| Bank | Price (INR) | Change (INR) | Change (%) |
|---|---|---|---|
| Canara Bank | 87.92 | -1.52 | -1.69% |
| Bank of Baroda | 232.05 | -3.79 | -1.61% |
| State Bank of India | 757.10 | -11.50 | -1.50% |
| Panjab National Bank | 95.67 | -1.24 | -1.28% |
| Axis Bank Ltd. | 1068.10 | -9.75 | -0.91% |
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Among the top laggards were Canara Bank, Bank of Baroda, State Bank of India, Punjab National Bank, and Axis Bank. These stocks registered losses between 0.91% and 1.69%, contributing significantly to the decline in the Nifty Bank index. Despite the overall negative sentiment, the move could support medium-term loan demand, though markets appeared to focus on immediate earnings implications for the sector.
Auto, NBFC Stocks Hold Steady Amid Broader Market Weakness
While headline indices dipped, rate-sensitive sectors displayed resilience. By 10:10 am, the Nifty Auto index remained largely unchanged, even as the Bank Nifty and Nifty Private Bank indices slipped a modest 0.3%. In contrast, the broader market saw a sharper decline of over 0.5%. Investors appeared optimistic that the RBI’s repo rate cut would lower borrowing costs, potentially boosting demand in key consumption-driven sectors like automobiles and housing.
Why Rate Cuts Impact Rate-Sensitive Stocks?
Sectors such as autos, banking, and non-banking financial companies (NBFCs) typically react positively to lower interest rates. Reduced lending rates make financing more accessible, encouraging consumer spending on high-value purchases like vehicles and homes. This environment not only supports automakers and home loan providers but also enhances credit growth prospects for banks and NBFCs by improving interest rate transmission.
RBI’s First Rate Cut in 5 Years Signals Growth-Oriented Shift
The latest repo rate reduction marks the RBI’s first cut in five years, underscoring its intent to cushion the economy against emerging global risks. With growing concerns about a slowdown and potential fallout from international trade tensions—particularly U.S. tariffs—the central bank’s move is viewed as a proactive measure to support domestic demand and maintain economic momentum.
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