The Bank Nifty was trading flat ahead of the outcome, but majority names in the index were trading higher. The likes of IDFC First Bank, Yes Bank, RBL Bank, Punjab National Bank and Federal Bank rose 1-4 percent.

Shares of interest rate sensitive stocks showed were higher ahead of the outcome of the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting.

Sectors like banking, real estate and auto, among others, will be impacted the most from the rate cuts as the cost of the products will be directly influenced due to increase in interest rate.

The Bank Nifty was trading flat ahead of the outcome, but majority names in the index were trading higher. The likes of IDFC First Bank, Yes Bank, RBL Bank, Punjab National Bank and Federal Bank rose 1-4 percent.

The Nifty PSU bank index was up around a percent, with gains visible in IDBI, Central Bank of India, Canara Bank, Oriental Bank of Commerce, Syndicate Bank and PNB. Stocks have risen around 1 percent.

Meanwhile, automobile stocks soared in trade as well, with Nifty Auto index gaining over 1 percent. TVS Motor, Bajaj Auto, Motherson Sumi, Ashok Leyland, Tata Motors and Apollo Tyre rose 2-3 percent.

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In the real estate space, the Nifty Realty index was higher by a percent, with gains seen in Sunteck Realty, Indiabulls Real Estate, Godrej Properties, Brigade and Prestige gained between 0.5-3 percent.

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The MPC may not tinker with the policy rate but could change its stance to 'neutral' from 'calibrated tightening'.

Economists and market experts, who Moneycontrol spoke to, were divided on the rate cut but confident of a change in stance by the banking regulator.

This is the first policy of new RBI Governor Shaktikanta Das, who also heads the monetary policy committee.

“With a new RBI governor at the helm and supporting incoming data, mainly in the form of benign inflation, which is below RBI’s target of 4 percent, the clamour for a rate cut or a change in RBI’s monetary policy stance is picking up. We believe the probability of a rate cut in the near term is low, but cannot be ruled out,” Vivek Ranjan Misra, Head of Fundamental Research, Karvy Stock Broking told Moneycontrol.

“A change in stance from “calibrated tightening” to “neutral” is more likely. However, as liquidity pressures abate, borrowing rates and liquidity conditions are likely to improve. Sentimentally, it is a big positive for the broader market,” he said.

Experts advise investors to stay with sectors like banking, discretionary consumption, heavily indebted sectors like steel, power, real estate and infra which are likely to be key beneficiaries of a possible rate cut.