Rate-sensitive stocks gain ahead of RBI policy outcome
NEW DELHI: Most of the stocks from the rate-sensitive sectors were trading in the green in early trade on Wednesday ahead of RBI’s money policy outcome later in the day.
The BSE Realty and Auto indices were trading higher by 0.86 per cent and 0.54 per cent, respectively, around 9.40 am (IST). However, the BSE Bankex was almost flat around the same time.
Rating agency ICRA sees a 25 basis points repo rate cut in the policy review, followed by an extended pause. The rate cut will be supported by modest CPI inflation, which is expected to undershoot the March 2017 target of the Reserve Bank of India (RBI) and the continued fiscal consolidation attempted in the Union Budget for FY2018.
In the BSE Realty index, Indiabulls Real Estate was trading 1.40 per cent higher in early trade, followed by HDIL (up 1.17 per cent), Sobha (up 0.96 per cent), Unitech (up 0.90 per cent), DLF (up 0.77 per cent) and Godrej Properties (up 0.36 per cent).
Ashok Leyland, Tata Motors, M&M and Eicher Motors were trading higher by 2.66 per cent, 1.26 per cent, 0.74 per cent and 0.20 per cent, respectively, in the auto space.
Among the 10 components of the BSE Bankex, five were trading in the red, with Axis Bank falling the most at 0.66 per cent, followed by IndusInd Bank (down 0.66 per cent), ICICI Bank (down 0.57 per cent), PNB (down 0.53 per cent) and Bank of Baroda (down 0.21 per cent).
On the other hand, HDFC Bank, YES Bank, Federal Bank, Kotak Mahindra Bank and State Bank of India were up by 0.35 per cent, 0.27 per cent, 0.24 per cent, 0.12 per cent and 0.11 per cent, respectively.
Naresh Takkar, Managing Director and Group CEO, ICRA, said in a release: “There is a high likelihood of a 25 basis points cut in the repo rate in the forthcoming money policy review in February. The CPI inflation in the ongoing quarter is expected to remain below the 5 per cent forecast. Moreover, the Union Budget for FY2018 has balanced fiscal consolidation with increased capital spending, which would revive growth in a non-inflationary manner.”
According to BofA-Merrill Lynch, fiscal consolidation should allow RBI’s money policy committee to cut policy rate by 25 basis points on February 8, with CPI inflation likely to average 4 per cent until June.
Banks have already cut MCLRs after Prime Minister Narendra Modi’s December 31 speech. A RBI rate cut should translate into average lending rate cuts in the April-September ‘slack’ industrial season.
“Budget 2017 will help to cut lending rates by 50-75 basis points by September to offset the impact of the demonetisation shock in 2H17,” BofA-Merrill Lynch said in a report.
The BSE Realty and Auto indices were trading higher by 0.86 per cent and 0.54 per cent, respectively, around 9.40 am (IST). However, the BSE Bankex was almost flat around the same time.
Rating agency ICRA sees a 25 basis points repo rate cut in the policy review, followed by an extended pause. The rate cut will be supported by modest CPI inflation, which is expected to undershoot the March 2017 target of the Reserve Bank of India (RBI) and the continued fiscal consolidation attempted in the Union Budget for FY2018.
In the BSE Realty index, Indiabulls Real Estate was trading 1.40 per cent higher in early trade, followed by HDIL (up 1.17 per cent), Sobha (up 0.96 per cent), Unitech (up 0.90 per cent), DLF (up 0.77 per cent) and Godrej Properties (up 0.36 per cent).
Ashok Leyland, Tata Motors, M&M and Eicher Motors were trading higher by 2.66 per cent, 1.26 per cent, 0.74 per cent and 0.20 per cent, respectively, in the auto space.
Among the 10 components of the BSE Bankex, five were trading in the red, with Axis Bank falling the most at 0.66 per cent, followed by IndusInd Bank (down 0.66 per cent), ICICI Bank (down 0.57 per cent), PNB (down 0.53 per cent) and Bank of Baroda (down 0.21 per cent).
On the other hand, HDFC Bank, YES Bank, Federal Bank, Kotak Mahindra Bank and State Bank of India were up by 0.35 per cent, 0.27 per cent, 0.24 per cent, 0.12 per cent and 0.11 per cent, respectively.
Naresh Takkar, Managing Director and Group CEO, ICRA, said in a release: “There is a high likelihood of a 25 basis points cut in the repo rate in the forthcoming money policy review in February. The CPI inflation in the ongoing quarter is expected to remain below the 5 per cent forecast. Moreover, the Union Budget for FY2018 has balanced fiscal consolidation with increased capital spending, which would revive growth in a non-inflationary manner.”
According to BofA-Merrill Lynch, fiscal consolidation should allow RBI’s money policy committee to cut policy rate by 25 basis points on February 8, with CPI inflation likely to average 4 per cent until June.
Banks have already cut MCLRs after Prime Minister Narendra Modi’s December 31 speech. A RBI rate cut should translate into average lending rate cuts in the April-September ‘slack’ industrial season.
“Budget 2017 will help to cut lending rates by 50-75 basis points by September to offset the impact of the demonetisation shock in 2H17,” BofA-Merrill Lynch said in a report.
