RBI Rate Cut and ₹1.45 Lakh Crore Liquidity Boost: NBFCs, SMID Banks and Auto Stocks in Focus

The Reserve Bank of India has delivered a major boost to the financial markets by cutting the repo rate by 25 basis points and injecting ₹1.45 lakh crore of liquidity.

Short-Term Bond Rally Favors NBFCs and SMID Banks

The large liquidity infusion, ₹1 lakh crore through OMOs and another ₹45,000 crore via a USD/INR swap has caused a sharp fall in short-term bond yields. This decline is steeper compared to long-term yields and is particularly positive for NBFCs and small-to-mid-sized banks. Their borrowing and deposit costs are expected to come down, improving their margins.

NBFCs benefit from cheaper funds, while SMID banks gain from easier liquidity and recent capital inflows.

Credit Growth Expected to Strengthen

Credit growth has already exceeded expectations at 11.3% as of mid-November. With lower interest rates and better liquidity, growth is expected to rise further.

Autos Become Major Beneficiaries

The auto industry is seen as another clear winner. GST cuts, combined with lower interest rates, are expected to make vehicle financing cheaper and fuel demand.

Short-Term Relief but Long-Term Risks Remain

Despite the positive impact of RBI’s measures, some risks remain. A high current account deficit continues to be a concern, and progress on the India–US trade deal will be important for easing external pressures. Additionally, fiscal deficit challenges may keep the yield curve steep.

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Conclusion

RBI’s rate cut and liquidity boost have delivered immediate relief to the financial system, easing borrowing costs and improving market sentiment. NBFCs, SMID banks, and auto companies are set to gain the most from this supportive environment.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.