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How RBI’s Pause is Boosting Confidence in India’s Real Estate Sector and Driving Stock Prices Up

RBI's Pause repo rate boost Indian housing market

Following the RBI’s surprise pause in rate hikes on Thursday, Indian stock markets recovered from early losses. The repo rate was kept unchanged at 6.50%, contrary to wide expectations for a 25 basis point increase.

RBI governor Shaktikanta Das said, “The MPC (Monetary Policy Committee) unanimously decided to keep the repo rate unchanged at 6.50% at this meeting.

Despite the RBI’s decision to pause the rate hike cycle for this meeting, Das stressed that the MPC would not hesitate to raise repo rates in future meetings.

Indian central bank has increased the repo rate by 250 basis points since May 2022. Repo is the rate at which the central bank lends short-term funds to banks.

As a result of the RBI decision, the Sensex gained 146 points, or 0.25%, to 59,847, while the Nifty50 gained 40 points, or 0.23%, to 17,597.

Amid a challenging environment, Das also boosted confidence with his observation that India’s financial sector remained resilient and stable despite extreme uncertainty.

Kotak Mahindra AMC’s managing director, Nilesh Shah, drew an analogy between RBI’s decision and Sachin Tendulkar’s stroke play.

Taking a pause on the RBI is like Sachin hitting the ball wherever he wants on a tricky pitch with his eyes set in. The RBI had the option of a rate hike or a pause. The pause was not entirely unexpected. The RBI will monitor developments and data before making their next decision. According to Shah, “No matter which direction they hit the ball, the RBI is expected to fetch the maximum run and win the match on inflation and growth.”

Nifty50 gainers and losers

Top gainers Change Top losers Change 
State Bank of India1.90%ONGC-1.50%
Bajaj Finance1.73%HCL Technologies-1.01%
Adani Enterprises1.63%Nestle India-0.79%
IndusInd Bank1.55%Titan-0.66%
L&T1.16%Britannia Industries -0.65%
Source:NSE

Stocks of real estate companies and PSU banks rise after the RBI’s pause decision

As a result of high inflation and rising interest rates, the Nifty Realty was among the top performing sectoral indices today.

In contrast to general expectations, the RBI decided to maintain the repo rate at 6.5% today. This is indeed good for the residential real estate market, which faces a tough road ahead amid massive layoffs by large corporations. The Indian housing market is invariably impacted by global economic dynamics. According to Anuj Puri, chairman of Anarock Group, the RBI’s decision to keep repo rates unchanged is a welcome relief for homebuyers.

During the first quarter of 2023, Knight Frank reported a decline in sales in Bengaluru and Mumbai at -6% and -2%, respectively.

Puri said the pause provides relief to affordable and mid-segment homebuyers who feared an increase today would have made property-buying through home loans even more difficult.

Interest rates have risen continuously over the past year, pushing up home loan rates. The industry expects rates to drop in the future.

Godrej Properties led the rally with a 4% increase in Nifty Realty following the monetary policy decision on Thursday.

Top performers on Nifty Realty % change 
Godrej Properties4%
DLF2.83%
Oberoi Realty2.81%
Indiabulls Real Estate 2.41%
Sobha 1.87%
Source:NSE

Following the RBI’s decision, the Nifty PSU Bank index rose 0.91%. State Bank of India, Punjab National Bank, and Bank of Maharashtra were among the top gainers with gains exceeding 1.5%.

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