Sensitive stocks likely to benefit most if MPC cuts rates
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.On Wednesday, S&P BSE Sensex closed just 25 points away from 37,000 while the Nifty 50 reclaimed 11,000 levels for the first time since October. Sustained trade above 11,000 could take the index towards 11,200-11,400 levels, suggest technical experts. 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 clamor 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.
Jayant Manglik, President Religare Broking 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. 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.source- www.moneycontrol.com
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. 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.
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