Given the 50 basis point cut in the interest rate, is it a good time to start nibbling at the interest rate sensitive stocks? Check out what the experts say.
AK Prabhakar, Senior Vice President (Equity Research), Anand Rathi
The rate cut was very much in-line with the expectation and I think it is just a one-time affair as rate cuts may not happen in the immediate future. Rate sensitive stocks have already priced in the positives.
The crude oil prices are already high and this is impacting inflation numbers. On May 7, the Parliament is expected to consider the finance bill, post which there is an expectation of a rise in retail prices of subsidised fuels, including diesel. This will further stoke inflation. Overall, the markets are likely to remain range bound with the Nifty hovering between 5,100-5,200 levels.
Deven Choksey, MD, KR Choksey Securities
Banks are favourably placed currently as there is ease in Inflation. Further, with this 50 bps rate cut, they have been given some relief on the liquidity front.
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The interest rate cut has arrested the declining growth while keeping the Inflation numbers under control. The RBI will try to make sure that liquidity is available in the system, which will lead to further rate cuts in the coming months.
Rate sensitive sectors like banks would likely to benefit from such a move. I feel that stocks like State Bank of India, Axis Bank and IndusInd Bank can give good returns from here on.
Phani Shekhar, Fund Manager, Angel Broking
The rate cut of 50bps by the RBI has come as a pleasant surprise as most market participants, including us, had been expecting a 25bps reduction. At the same time, we also realise that another rate cut may not take place any time soon. Welcoming the rate cut by the RBI and keeping in mind the statement released regarding the economy, we maintain a hawkish stance.
I recommend HOLD rating for all rate-sensitive stocks. Banking and auto stocks could see some benefits accruing.
Kishore Ostwal, MD and Chairman, CNI Research
I had not been expecting any kind of a rate-cut till day before yesterday. However, inflation data revealed yesterday prepared the ground for this cut. Realty and Banking stocks are bound to benefit from this announcement. However, I also feel that all corporates from across the board will also be benefitted.
Kishore Bang, Vice Chairman and Managing Director, Nirmal Bang Group
The Reserve Bank of India unexpectedly announced a 50 basis point (bps) reduction in the repo rate to 8% as against a market expectation of 25 bps reduction.
Furthermore, the RBI increased the borrowing limit of banks under the marginal standing facility from 1 to 2% of their demand and time liabilities. Whether this is a signal of declining inflation in future remains suspect as we believe the deregulation of administered prices and the rise in indirect taxes could further fuel inflation.
The RBI’s earlier higher interest rate policy contributed to the industrial and economic slowdown and the central bank in our view is reversing this policy as the inflation was cost-push. The critical question is whether, lower interest rates and more liquidity for banks would drive higher private sector capital formation.
We believe investments will be determined more by global developments rather than domestic factors and when developed nations’ growth trajectory is assured, capital formation in the Indian economy would improve.