Shares of rate-sensitive sectors such as banks, autos and real estate were mixed on Wednesday after Reserve Bank of India (RBI) Governor Shaktikanta Das announced a 25 basis point (bps) hike in the repo rate, raising the critical benchmark rate to 6.5. percentage.

The Monetary Policy Committee (MPC) decision was 4-2. This is the first rate hike in 2023. This follows a 35 basis point hike in the repo rate on December 7, 2022.

The MPC also focused on removing accommodation to ensure inflation remains within target while supporting growth. In an MPC statement, the RBI said the decisions aligned with the medium-term target of achieving consumer price index (CPI) inflation of 4% within the +/- 2% range while supporting growth.

At 11:00 am, Nifty Bank, Nifty Private Bank, Nifty PSU Bank and Nifty Financial Services traded almost flat. The Nifty Auto and Nifty Realty indices fell 1%. In contrast, the Nifty 50 rose 0.58% to 17,823.

Bank of Baroda, IndusInd Bank, Axis Bank, Hero MotoCorp, Eicher Motors, Prestige Estates Projects and Oberoi Realty fell as much as 1% on the NSE. However, shares of State Bank of India (SBI), HDFC Bank, Tata Motors and Mahindra & Mahindra were all up less than 1%.

RBI said in an MPC statement that a strong outlook for agricultural and related activities is likely to boost rural demand. Urban consumption is expected to be supported by a rebound in contact-intensive industries and discretionary spending. Businesses and consumers surveyed by the Reserve Bank were upbeat about the outlook.

Strong credit growth, resilient financial markets, and the government’s continued push for capital spending and infrastructure create a favourable investment climate. On the other hand, the RBI said that external demand might weaken due to slowing global activity, adversely affecting exports.