RBI surprises, keeps repo rate unchanged: Rate-sensitive stocks trade mixed

The six-member MPC of the Reserve Bank of India (RBI) today decided against raising the repo rate in its monetary policy, unchanged at 6.50 percent. MPC says its decision is consistent with the stance of calibrated tightening of monetary policy in consonance with the objective of achieving the medium-term target for CPI inflation of 4 percent.

Inflation is projected at 4 percent in Q2:2018-19, 3.9-4.5 percent in H2 and 4.8 percent in Q1:2019-20, with risks somewhat to the upside. Rupee on the other hand has hit an all-time low of 74 against dollar, after RBI kept rates unchanged.

Inflation concerns were there after a steep rise in crude prices and hike in minimum support price (MSP) for agri-commodities. MPC says GDP growth

projection for 2018-19 is retained at 7.4 percent, with risks broadly balanced. Excluding the HRA impact, CPI inflation is projected at 3.7 percent in Q2 FY19, 3.8-4.5 percent in H2 and 4.8 percent in Q1 FY20.

Pami Dua, Ravindra Dholakia, Michael Patra, Viral Acharya and RBI governor Urjit Patel voted in favour of keeping the policy repo rate unchanged. Only Chetan Ghate voted for an increase in the policy rate by 25 bps.

Prices of rate sensitive stocks including automobiles, finance and realty were reeling under pressure on Thursday as the rupee hit new record low and oil prices continued to trade higher.

MPC says food inflation has remained unusually benign, which imparts a downward bias to its trajectory in the second half of the year.

With no change in interest rates, rate sensitive sectors include the Auto and Realty are trading in the red while on the other hand Bank Nifty managed to stay in the green.

The Nifty auto index is trading 2 percent lower as the sentiment remained weak dragged by Bajaj Auto, Ashok Leyland, TVS Motor which are down 3-4 percent while Eicher Motors, Mahindra & Mahindra and Maruti Suzuki shed 2 percent each.

The realty space is tacking a knock as well, down 1.7 percent dragged by DLF, Godrej Properties, Oberoi Realty, Phoenix Mills, Sobha and Unitech. Indiabulls Real Estate however is up half a percent.

Banking stocks are trading mixed with Nifty Bank gaining half a percent as IndusInd Bank up 2 percent followed by Federal Bank, HDFC Bank, ICICI Bank and Punjab National Bank.

On the other hand, State Bank of India, YES Bank, Bank of Baroda and Axis Bank are trading in the red.

Rajesh Agarwal of AUM Capital recommends a buy on Axis Bank with stop loss at Rs 568 and target of Rs 610 and a buy also on DLF with stop loss at Rs 152 and target of Rs 167.