Uncategorized

Top 12 rate-sensitive stocks likely to benefit most if MPC cuts rates – Moneycontrol.com

A pro-market Interim Budget and expectations of a change in Reserve Bank of India’s Monetary Policy Committee (MPC) stance at its bi-monthly review outcome on February 7, fuelled a rally on D-Street.

The S&P BSE Sensex is just 25 points away from 37,000 while the Nifty 50 reclaimed 11,000 levels for the first time since October on Wednesday. Sustained trade above 11,000 could take the index towards 11,200-11,400 levels, suggest technical experts.

The MPC may not tinker with the policy rate but could change its stance to neutral from calibrated tightening.

Economists and market experts who Moneycontrol spoke to were divided on the rate cut but confident of a change in stance by the banking regulator.

This is the first policy of new RBI Governor Shaktikanta Das, who also heads the monetary policy committee.

“With a new RBI governor at the helm and supporting incoming data, mainly in the form of benign inflation, which is below RBI’s target of 4 percent, the clamour for a rate cut or a change in RBI’s monetary policy stance is picking up. We believe the probability of a rate cut in the near term is low, but cannot be ruled out,” Vivek Ranjan Misra, Head of Fundamental Research, Karvy Stock Broking told Moneycontrol.

“A change in stance from “calibrated tightening” to “neutral” is more likely. However, as liquidity pressures abate, borrowing rates and liquidity conditions are likely to improve. Sentimentally, it is a big positive for the broader market,” he said.

Experts advise investors to stay with sectors like banking, discretionary consumption, heavily indebted sectors like steel, power, real estate and infra which are likely to be key beneficiaries of a possible rate cut.

Jayant Manglik, President Religare Broking Ltd told Moneycontrol that top sectors which are likely to benefit from possible monetary easing are infrastructure and real estate. A rate cut not only helps to ease the interest/debt burden of companies in these sectors but also leads to demand push.

“Some of the companies to benefit include L&T, KEC International and Kalpataru Power Transmission. Amongst the real estate companies, Godrej Properties is expected to be a beneficiary,” he said.

Apart from that, stocks like ICICI Bank, HDFC Bank, HDFC, Bajaj Finance, Maruti Suzuki, Ashok Leyland, Voltas, and Whirlpool could attract investor attention.

Here is a list of top 12 rate sensitive stocks which are likely to benefit the most if RBI decides to cut rates in February policy meeting or give hints for the upcoming meeting:

Analyst: Vivek Ranjan Misra, Head of Fundamental Research, Karvy Stock Broking

Hero MotoCorp & TVS Motor Company:

Two-wheeler stocks like Hero MotoCorp and TVS Motor are likely to be key beneficiaries. The fact that these two stocks are rural-focused and rely heavily on financing for their sales is a double positive for these stocks.

Given the rural focus of the interim budget and lower interest rates, it should bode well for the growth of these two companies.

Havells, Bajaj Electricals, Voltas, Bluestar & L&T:

Consumption related stocks like Havells India, Bajaj Electricals, Voltas and Bluestar too shall benefit from a rate cut. Lower rates can also boost capex, thus we would look at stocks like Larsen & Toubro.

Lower rates can also boost capex, thus we would look at stocks like Larsen & Toubro. Banks and NBFCs will also benefit from the change in the monetary policy stance.

ICICI Bank, Bajaj Finance:

Banks and NBFCs will also benefit from the change in the monetary policy stance. Among NBFCs, consumer finance-related stocks like Bajaj Finance will benefit as a rate cut would support their growth. Banks are likely to benefit, ICICI Bank is one name we would highlight.

Apart from supporting credit growth, a rate cut should aid their profitability as they would have to make lower provisions towards their employee benefit expenses.

Among NBFCs, consumer finance-related stocks like Bajaj Finance will benefit as a rate cut would support their growth. Banks are likely to benefit, ICICI Bank is one name we would highlight.

Apart from supporting credit growth, a rate cut should aid their profitability as they would have to make lower provisions towards their employee benefit expenses.

Analyst: DK Aggarwal is Chairman & Managing Director of SMC Investments & Advisors

Asian Paints Ltd:

Asian Paints is India’s leading paint company and ranked among the top ten decorative coatings companies in the world. The management expects Indian paints industry to grow at around 8 percent 12 percent in the next few years and demand factors remain strong in terms of growth.

Operating margins are likely to improve in the longer term on commencement of the newer plants, lower logistics costs, and production of high-margin water-based paints.

Coromandel International Ltd:

The company continues to invest towards infrastructure augmentation and capability development to offer a differentiated solution to the farming community.

Government’s ambitious plan to double the farm income by 2022 & fixation of the minimum support prices for crops brings out a sizeable opportunity for the company.

Also, the increase in prices of higher-fertilizer-consuming crops such as paddy, soybean, and sugarcane augurs well for the company.

On the developmental front, the acquisition of the bio pesticides business of EID Parry would enhance the company’s market presence in North America & Europe and push incremental revenues from the crop protection segment.

Indian Hotel Limited:

With a strong presence in the high demand, high-occupancy micro markets of Mumbai, NCR, Bangalore, and Goa places it well to cater to rapid growth in the domestic market. Company’s performance improved in the first six months of the ongoing financial year despite uncertainties.

Indian Hotels is in the process of selling some of its non-profitable properties internationally. It sold the Boston property and leased it back. The amount was used to pare debt.

Indian Hotels’ debt nearly halved in the last few quarters and the company plans to reduce it further by 30 percent in the next few quarters.

Bajaj Auto Limited:

The company has a diversified business model and a strong focus on profitable growth, widening reach in export markets and strategic alliances with global majors.

The management feels that the product mix in exports is deteriorating due to the higher share of Africa which is currently at 45 percent and is expected to increase to 50 percent. Nigeria contributes 50 percent of Africa’s volumes.

In the export market, motorcycle growth is mainly driven by the Africa market. On the other hand, 3Ws growth is driven by new markets (contributing 25% of sales) such as the Philippines, Latin America, Iran, and Iraq. The company plans to increase annual capacity in 3Ws (including quadricycles) from 840,000 units to 1,000,000 units.

ICICI Bank Limited:

Business performance of the bank such as domestic loan growth, overall corporate advances, retail loan growth, CASA ratio are continuously improving.

On the development front, it is increasing its presence across the country and working on fully leveraging existing resources and infrastructure. Further, it would also look at implementing additional cost optimization measures during the year, while growing its retail franchise.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More

Leave a Reply

Your email address will not be published. Required fields are marked *