RBI monetary policy review: According to market experts a rate cut brings an opportunity for equity investors to pick stocks from rate sensitive sectors that gain directly from falling interest rates - banks, auto and real estate.
Reserve Bank of India Governor Raghuram Rajan slashed the repo rate by 25 basis points to 6.50 per cent on Tuesday. According to market experts, a rate cut brings an opportunity for equity investors to pick stocks from rate sensitive sectors that gain directly from falling interest rates – banks, auto and real estate.
Post budget, the BSE Sensex surged 10.42 per cent to 25,399.65 till April 4. Rate sensitives have outpaced benchmark indices after the Budget as the BSE Auto, BSE Bankex and BSE Realty index advanced 14.13 per cent, 16.66 per cent and 19.60, respectively, during the same period.
A poll by financialexpress.com showed 46 per cent of respondents were expecting a rate cut by 25 basis points, whereas 33 per cent expect a rate cut by 50 basis points and rest see no rate cut by Rajan.
Reacting on the announcement, the BSE Sensex plunged over 400 points intraday after the rate cut.
Below are 5 rate sensitive stocks on which various brokerage houses are looking bullish:
Recommended By: Edelweiss Securities
Investment Rationale: Edelweiss says that the bank’s book are on par with peers, if not better. Moreover, the bank has adopted a good strategy of strengthened retail franchise. A fortified retail franchise equips bank to deliver higher risk adjusted metrics, aiding it ride cyclical downturns with minimal impact on valuations. The brokerage house has a ‘Buy’ recommendation on YES Bank with target price of Rs 1,176.
LIC Housing Finance
Target Price: 592
Investment Rationale: The company continues to grow its retail loan book at a healthy pace with improvement in asset quality. Angel Broking expects LIC Housing Finance to post a healthy loan book which is likely to reflect in a strong earnings growth.
Target Price: Rs 1089
Investment Rationale: Huge bid pipeline of re-development works at Delhi and other State Governments and opportunity from Smart City, positions NBCC to report strong growth, going forward.
Recommended By: Epic Research
Target Price: Rs 540
Investment Rationale: Axis Bank is expected to perform better due to its strong presence across India along with better operational profitability and reasonable valuations. The stock has made a strong base formation at Rs 370-380 levels in short term and may sustain for next upmove towards higher target of Rs 540.
Recommended By: Religare Institutional Research
Target Price: Rs 3,300
Investment Rationale: The brokerage house believes that the year FY17 will be the year of the 2-wheelers. Religare is bullish on Hero MotoCorp shares with a target price of Rs 3,300.