Mumbai: Interest rate-sensitive realty, banking and auto stocks surged up to 18.5 percent Thursday after Reserve Bank Governor Raghuram Rajan sprang a surprise by cutting interest rates by 25 basis points a move that is likely to result in cheaper home and auto loans.
From the realty sector Housing Development and Infrastructure Ltd surged 18.59 percent and Prestige Estates Projects zoomed 11.46 percent on the BSE.
Among others, Indiabulls Real Estate gained 10.55 percent, DLF (10.39 percent), Anant Raj (8.80 percent), Unitech (8.01 percent) and Sobha (6.92 percent).
Following the smart rally in these shares, the BSE realty index soared 7.99 percent and was the star-performer among 12 sectoral indices.
"The repo rate cut of 25 bps is a welcome step. The rate cut will help boost confidence and push economic growth as banks and other lending institutions are likely to pass on this reduction to customers by way of lower loan rates," said Kavi Arora, MD & CEO Religare Finvest Limited.
Banking stocks also attracted immense buying with SBI surging 5.02 percent, ICICI Bank (4.60 percent), Canara Bank (4.10 percent), PNB (3.35 percent), Yes Bank (3.30 percent), Bank of India (3.23 percent) and Axis Bank (2.57 percent).
Tracking gains in these scrips, the BSE banking index rallied 3.29 percent to 22,023.30.
Among auto stocks, Mahindra & Mahindra rose by 3.10 percent, Maruti Suzuki India by 3.04 percent, Tata Motors by 2.33 percent and Bajaj Auto by 2.30 percent.
The BSE auto index moved up by 2.13 percent to end at 19,306.90.
The benchmark Sensex surged 728.73 points in its biggest single-day gain since May 2009 to end at 28,075.55.
"This rate cut ... Can be taken by the markets as a signal to a rate lowering cycle. This also signals a certain confidence that the RBI is showing in longer term trends on fiscal front and a leading signal of a victory over the inflation dragon," said Tushar Pradhan, Chief Investment Officer, HSBC Global Asset Management India.
The rate cut ahead of a scheduled RBI policy meeting on February 3 will result in "more money in the hand of the consumers," Finance Minister Arun Jaitley said, while bankers said it was a "movement in direction of interest rate cut."
Rajan, who had focused on quelling inflation since taking office in September 2013, lowered the benchmark repurchase rate to 7.75 percent from 8 percent, the first reduction since May 2013.
