If you’re Ignoring these Sectors after the Rate Cut, you might regret it- Realty and NBFC

Yes, the RBI has indeed just cut the repo rate...now what?

This move has a trickle-down effect across the entire economy. Cheaper money for banks typically translates into lower interest rates for us, the borrowers. This, in turn, usually fuels increased spending from consumers and businesses, gives a boost to corporate profits, and often lifts overall stock market sentiment. 

Visual showing the likely impact of the interest rate cut

Beyond these general positive impacts, some sectors are particularly well-positioned to benefit, with NBFCs (Non-Banking Financial Companies) and Real Estate standing out as two key gainers from this interest rate reduction.

NBFCs depend on borrowing money to lend it further, and when interest rates fall, their cost of funds comes down. But here’s the interesting part: many NBFCs don’t immediately reduce the interest rates they charge to customers. As a result, the Net Interest Margin (NIM), i.e. the difference between their lending and borrowing rates, increases, improving their profitability.

In essence, they pay less to borrow, but continue to earn the same (or nearly the same) on loans given out. This margin expansion makes them more attractive to investors, and the stock market reflected that sentiment right away. On the day of the repo rate announcement:

• Bajaj Finance rose 4.9%

• Muthoot Finance gained 6.61%

• Shriram Finance jumped 5.65%

  
  

The real estate sector is another big winner in a falling interest rate environment. Lower home loan rates directly impact buyer sentiment, making homes more affordable and EMIs more manageable. At the same time, developers benefit from cheaper project financing, giving them better cash flow flexibility.

With affordability going up and borrowing costs going down, both supply and demand sides of the real estate equation get a boost. This optimism was visible in the markets:

• Godrej Properties rallied 6.7%

• Sobha Ltd. was up 4.82%

These aren’t just numbers; they’re early signals of how markets revalue businesses when credit conditions become more favourable.

While not leading the rally, the auto sector tends to respond well to interest rate cuts over time. Lower auto loan rates can make vehicle ownership more accessible, especially in the two-wheeler and entry-level car categories. While we may not see a full-fledged comeback immediately, early signs of momentum could start to build if credit continues to ease.

A ₹2.5 Trillion Liquidity Boost

Adding further fuel to the economy, the RBI also cut the Cash Reserve Ratio (CRR) by 100 basis points (1%). This move is expected to infuse approximately ₹2.5 lakh crore (₹2.5 trillion) into the banking system. That’s a massive liquidity injection, giving banks even more room to lend and support business activity.

Together with the rate cut, this CRR reduction shows the RBI is actively creating space for economic growth to gain traction.

RBI’s New Stance: Neutral and Watchful

The central bank has also shifted its policy stance from “accommodative” to “neutral.” That means while they’ve cut rates for now, they’re not committing to a long easing cycle. Instead, they’ll be watching economic data closely before deciding on the next move.

As for inflation, the RBI has forecasted it to stay around 3.7% for the year, suggesting they’re optimistic but cautious.

This is one of those periods where macro policy aligns with sectoral opportunity. If you’re invested in mutual funds or directly in equities, now could be a good time to review your portfolio. NBFCs, real estate, and potentially even auto could benefit from this cycle, but smart entry and positioning will matter.

Keep an eye on how these sectors perform in the coming quarters, and don’t ignore the signals the market is already giving.

Disclaimer: This content is for educational purposes only; please conduct your own research and consult with a qualified investment advisor before making any investment decisions.