The Monetary Policy Committee (MPC) has maintained the status quo on policy rates with repo rate at 6.5 percent in its meeting on October 6, as widely expected, possibly signalling a longer pause with a word of caution given the global economic sentiment. Plus, the central bank has kept its economic growth forecast and inflation projections for FY24 unchanged.
Experts largely expect the policy rate to remain unchanged at least till the end of current financial year (FY24) and the RBI to keep a close eye on the inflation considering the number of factors like lower area sown under pulses, dip in reservoir levels, El Niño conditions and volatile global energy and food prices, while the growth has held up well. The CPI inflation eased to 6.83 percent in August from 7.44 percent in previous month, which is still above the RBI's target of 4 percent (+/- 2 percent).
"As the cumulative policy repo rate hike of 250 basis points is still working its way through the economy, the MPC decided to keep the policy repo rate unchanged at 6.50 percent in this meeting, but with preparedness to undertake appropriate and timely policy actions, should the situation so warrant," the MPC said in its release.
The MPC further said it would remain resolute in its commitment to aligning inflation to the target and anchoring inflation expectations. The MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth.
"MPC kept rates and stance unchanged, hinting at a longish pause with a word of caution due to the state of global economy. As previously pointed out MPC's target inflation of 4 percent was explicitly mentioned yet again. MPC will remain data dependent and incremental actions by way of liquidity measures continues to be our base case," Radhavi Deshpande, President & Chief Investment Officer at Kotak Mahindra Life Insurance said.
The market seems to be knowing the RBI move as it has bounced back in previous session and continued its uptrend on October 6 as well, with the Nifty50 rising 95 points to 19,640 and the BSE Sensex climbing 322 points to 65,953, as all sectors participated in gains. Even the volatility cooled down further, with the India VIX falling 5.2 percent to 10.37 levels at 13:05 hours IST.
Even the Bank Nifty was up 133 points at 44,346, while the Nifty Auto and Realty indices gained 0.4 percent and 1 percent respectively.
"There weren’t any surprises in the Governors’ statement. Sometimes no news is good news, which is why markets have reacted with a slightly positive bias. However, RBI too is worried about the global macro-economic environment," Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities said.
The global economy is slowing due to tighter monetary conditions. The US 10-year bond yields have hardened to 4.74 percent and US Dollar index has appreciated to 106.44 levels.
"There are signs that rates may have topped out but they are not going down in a hurry. It remains to be seen how the world adjusts to higher interest rates not seen in the last 22 years. Thus, RBI would like to play their shots carefully on an ever evolving turning pitch globally," Sheth said.
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We have collated a list of rate-sensitive stocks that may be a good buy at current levels or on dips from a two to three weeks’ perspective. Returns are calculated based on October 5 closing price:
Expert: Jigar S Patel, Senior Manager - Equity Research at Anand Rathi
HDFC Bank: Buy | LTP: Rs 1,544 | Stop-Loss: Rs 1,450 | Target: Rs 1,600 | Return: 3.6 percent
After making the high of Rs 1,670 on September 15, 2023, since then it has been making lower tops and lower lows, which resulted in a 11 percent cut in price. At the current juncture, the said counter has halted near its support of Rs 1,485–1,500. Additionally, in the previous session, it made a Bullish Engulfing candlestick pattern near the support zone, followed by bullish divergence near the support zone (refer to the chart), which is looking lucrative.
So, one can buy only above in the range of Rs 1,510–1,530 for a target of Rs 1,600 with a stop-loss of Rs 1,450 on a daily close basis.
Note: Bullish Engulfing pattern involves two candles with the second green candle completely engulfing the ‘body’ of the previous red candle.
Punjab National Bank: Buy | LTP: Rs 77.45 | Stop-Loss: Rs 60 | Target: Rs 95 | Return: 23 percent
On the monthly chart, PNB is a clear-cut buy candidate. Since the start of 2023, we saw a massive rally in the counter from Rs 45 to Rs 83, approximately, which comes around 84 percent appreciation.
At the current juncture, PNB is in profit-booking mode. As we advance, Rs 70-74 would be an ideal bargain to enter for an upside target of Rs 95 and stop-loss would be Rs 60 on a daily close basis.
Expert: Vidnyan Sawant, AVP - Technical Research at GEPL Capital
AU Small Finance Bank: Buy | LTP: Rs 720 | Stop-Loss: Rs 680 | Target: Rs 785 | Return: 9 percent
AU Small Finance Bank has exhibited a positive rebound, finding crucial support at Rs 688 levels, which signals a significant shift in market sentiment at this key juncture. Notably, a Double Bottom price pattern has emerged around Rs 690 levels, indicating robust buying interest at lower price points.
Furthermore, this upward trajectory is bolstered by the stock consistently finding support at the 34-week exponential moving average (EMA), underscoring its bullish momentum.
Moreover, the relative strength index (RSI) is displaying a positive hidden divergence, signaling strong positive momentum in the stock's movement.
Looking ahead, it's reasonable to anticipate continued upward movement in the stock, with a potential target price of Rs 785. It's advisable to set a stop-loss at Rs 680 on a closing basis to manage risk effectively.
Bajaj Finance: Buy | LTP: Rs 7,850 | Stop-Loss: Rs 7,725 | Target: Rs 8,175 | Return: 4 percent
Bajaj Finance stock has shown an impressive upward trend, starting from its lower levels around Rs 6,800. This is evident from the steepness of the rising trend lines, which indicates strong positive momentum. The stock has also been able to sustain near its all-time high levels, showcasing the robust strength of the positive trend.
One notable feature of this upward movement is the consistent formation of higher highs and higher lows, signaling a sustained upward momentum in the stock's price.
Additionally, the stock has demonstrated resilience during declines, consistently rebounding from support levels defined by the 13-day exponential moving averages (EMA). This suggests that there is strong support for the stock at these levels, adding to the bullish sentiment.
Furthermore, the RSI has remained above the 60 mark on various time frames, including daily, weekly, and monthly. This consistent RSI reading above 60 indicates strong positive momentum in the stock.
Looking ahead, it is reasonable to anticipate that the upward movement will continue, potentially reaching Rs 8,175 levels. It is advisable to set a stop-loss at Rs 7,725 on a closing basis to manage risk.
CSB Bank: Buy | LTP: Rs 350.1 | Stop-Loss: Rs 320 | Target: Rs 395 | Return: 13 percent
The stock has consistently formed higher tops and higher bottoms, indicating a sustained bullish trend. It is presently maintaining multiyear high levels, underscoring the strong bullish sentiment in the market.
A notable feature of this stock's performance is the recurring Change in Polarity (CIP) formation that occurs following each upside breakout. This pattern suggests a significant underlying strength driving the stock's upward movement.
Recent developments on the daily charts reveal that the stock has broken out of a consolidation phase, and this breakout is supported by a notable increase in trading volume. The confirmation through trading volume suggests that the uptrend is likely to persist.
Additionally, the stock is trading above key moving averages, including the 50, 100, and 200-day EMA, further confirming the presence of an uptrend.
Looking ahead, it is reasonable to anticipate that the stock's price will continue to ascend, potentially reaching Rs 395 levels. To manage risk, it is advisable to implement a stop-loss strategy at Rs 320 on a closing basis.
Expert: Avdhut Bagkar, derivatives & technical analyst at StoxBox
State Bank of India: Buy | LTP: Rs 593.4 | Stop-Loss: Rs 580 | Target: Rs 640 | Return: 8 percent
Until the support of Rs 564 is protected, its 200-SMA, the bias towards the stock remains optimistic. To break out on the upside, the price action must surpass the hurdle of Rs 605.
Successive closes over this threshold should trigger the next breakout, leading the stock towards Rs 640 levels. Immediate support stays at Rs 580. We advocate taking a bullish approach over the State Bank of India stock maintaining a stop-loss at Rs 580, with a price objective of Rs 640.
Manappuram Finance: Buy | LTP: Rs 142.3 | Stop-Loss: Rs 130 | Target: Rs 155 | Return: 9 percent
Technically, the stock is demonstrating weakness to overcome the barrier of Rs 155. It did make efforts to absorb all the selling pressure emerging on the way, but failed to conquer the dominating sell-off.
However, the stock is perceiving accumulation in the range of Rs 135 to Rs 130 and as long as this range keeps on bolstering the upward bias, the stock may find enough strength to cross upside pressure. Risk takers may enter with a stop-loss of Rs 130 eyeing target of Rs 155.
Indiabulls Real Estate: Buy | LTP: Rs 80.55 | Stop-Loss: Rs 72 | Target: Rs 100 | Return: 24 percent
Following a robust breakout over its 200-SMA (simple moving average) set in September this year, the bulls have fast-tracked its momentum. The stock appears to be rising with the “higher high, higher low” formation seeking to enter three-digit territory again.
Unless the cushion of Rs 72 is breached, the trend to expect accumulation on healthy down moves. For the price objective of Rs 100, conservative traders may keep stop-loss at 72.
Expert: Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd.
Larsen & Toubro: Buy | LTP: Rs 3,115 | Stop-Loss: Rs 2,930 | Target: Rs 3,340 | Return: 7 percent
The counter has witnessed a breakout of a triangle formation on the daily chart, confirming the bullish trend. It has retested its previous breakout level at around Rs 2,960 and bounced back strongly, starting a new leg of rally towards Rs 3,200 levels. The overall structure of the counter looks good for short- to long-term investment, as it is trading above all its important moving averages.
Both MACD (moving average convergence divergence) and the momentum indicator RSI (relative strength index) are also positively poised, supporting the bullish momentum.
On the higher side, Rs 3,200 is the susceptible level; above this, Rs 3,300+ is the near-term target for the counter with a stop-loss of Rs 2,930.
Prestige Estates Projects: Buy | LTP: Rs 671 | Stop-Loss: Rs 600 | Target: Rs 780 | Return: 16 percent
The counter has witnessed a breakout of long consolidation of 18 months with strong volume on the weekly timeframe, while on the daily timeframe it has broken a triangle formation with huge volume. The structure of the counter looks lucrative as it is trading above all its important moving averages.
Additionally, the technical indicators, including the RSI and the MACD, align with the stock's current momentum, further reinforcing its strength.
In terms of price levels, the stock faces a notable psychological hurdle at Rs 700. A breach above this level could pave the way for a potential upward move towards Rs 780 and beyond. On the downside, Rs 600 serves as a robust demand zone, offering substantial support in the event of a correction.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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