Rate sensitive stocks such as banks, realty, and autos traded mixed on Friday after the Reserve Bank of India (RBI) hiked repo rates by 50 basis points (bps) to 5.4 per cent. Nifty Bank, Nifty PSU Bank, Nifty Private Bank, and Nifty Realty indices were trading in positive territory, gaining up to one per cent. While Nifty Auto index was seen ruling in the red, down 0.3 per cent. Domestic equity market benchmarks BSE Sensex and Nifty 50 extended gains soon after RBI Governor Shaktikanta Das concluded the MPC meet. The top contributor to the indices’ gain was ICICI Bank, which jumped more than 2 per cent.
Barring IndusInd bank, Bandhan Bank, HDFC Bank stocks, other Nifty Bank stocks (Kotak Mahindra Bank, Punjab National Bank, AU Bank, Axis Bank, State Bank of India, Federal Bank, IDFC First Bank, ICICI Bank) were trading higher in the range of 0.5-2 per cent. Analysts say that since oil prices have corrected sharply, lower inflation expectations are leading to this rally in rate sensitive sectors like auto, banking and realty. “Investors are advised to keep booking profits as technically markets are overbought. New buying should be done only when Nifty corrects to 16800,” AR Ramachandran, Co-founder & Trainer, Tips2Trades, told FinancialExpress.com. On NSE, Nifty Bank index jumped 285 points or 0.75 per cent. Nifty PSU Bank index jumped over 1 per cent, and Nifty Private Bank index added 0.7 per cent.
Nifty Auto index was down 0.4 per cent or 53 points. Investors must continue holding on to these rate sensitive stocks. Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst and founder, Gemstone Equity Research & Advisory Services, told FinancialExpress.com that all investors need to do is take some money off the table from the stocks of these sectors where the stocks have run up too hard in the recent time. “They need to focus on stock rotation within these sectors; but broadly speaking, it would be advisable to stay invested in these rate sensitive sectors,” he added. Vaishnav advised booking profits in Maruti Suzuki India and M&M, and initiating longs in Ashok Leyland, and Tata Motors stocks.
Aamar Deo Singh, Head Advisory, Angel One, told FinancialExpress.com that RBI’s rate hike by 50 basis points was along expected lines, to tame the surging inflation. It’s bound to have an impact on various rate sensitive sectors such as Auto, Banking and Realty but given the relative strength of the Indian economy, as compared to its peers, the market has taken the rake hike in its stride. “Investors are, however, advised to trade cautiously & look at partial profit booking, on the back of global headwinds, including the current China-Taiwan issue,” Singh advised investors.
The Nifty Realty index gained more than half a per cent. Banking, Real estate and Auto sectors would be most affected by the RBI rate hike as loan financing is a major part of these sectors, said an analyst. “Most of the industries after facing headwinds due to steep increase in raw materials cost and fuel prices started to revive their business as commodity prices are cooling down but a hike in the rates will again increase the burden. Investors may hold their positions in these stocks as the rate hike was in line with the market expectation,” Ravi Singh, VP & Head of Research, Share India Securities, told FinancialExpress.com.
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