Time to reset economy

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Time to reset economy

Last Updated : Dec 05, 2019 03:44 PM IST | Source: Moneycontrol.com

Experts say RBI may cut repo rate by 60-70 bps in 2020; 15 rate-sensitive stocks to bet on

A rate cut generally augurs well for companies that are debt-laden (as it reduces interest cost), banks as well as, non-banking financial companies (NBFCs) as it brings down the cost of funds. For the real estate sector, a fall in interest rates means lower EMIs.

The Monetary Policy Committee (MPC) on December 5 unanimously decided to keep the repo rate unchanged at 5.15 percent in its sixth bi-monthly policy meeting while retaining an accommodative stance.

Even though the D-Street was expecting a 25 bps rate cut at the bare minimum, experts say that RBI's decision to maintain the repo rate at 5.1 percent is "not a big deal."

"It is a surprise. But, the RBI has already given 135bps repo rate cut, and one policy waiting is not a big deal. We will see another 60-70 bps rate cut in 2020 as inflation will cool off," Kaushik Das, Chief Economist - Deutsche Bank, told CNBC-TV18.

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A rate cut generally augurs well for companies that are debt-laden (as it reduces interest cost), banks as well as, non-banking financial companies (NBFCs) as it brings down the cost of funds. For the real estate sector, a fall in interest rates means lower EMIs.

We have collated a list of 10 stocks that are likely to benefit the most from future rate cut:

Expert: DK Aggrawal, Chairman and Managing Director, SMC Global Securities Ltd

Marico Ltd

The company will continue to drive sustained profitable volume-led growth over the medium term through its focus on strengthening the franchise in the core categories and driving the new engines of growth towards gaining critical mass.

Over the medium term, the company retains the target of 8-10 percent volume growth and healthy market share gains in the India business.

The company aims to build healthy foods, premium hair nourishment and male grooming into growth engines and expects to deliver value growth at 20 percent plus CAGR over the medium term in these portfolios.

KEC International Ltd

The company is performing well and delivering on all the three parameters of revenue, profitability and order intake. T&D business has delivered a stellar performance, backed by robust execution in SAARC and the Americas.

The railway business continues to grow, as it expands portfolio in other segments. The management expects international business to pick up with large orders from Jordan, Saudi, Far East (Indonesia, Thailand), etc. International T&D, sub-stations and civil infra will be key drivers for FY20. Moreover, the company has maintained its annual guidance of 20% growth for FY20 revenue.

Ultratech Cement Ltd

The government's commitment to reviving the economy and the thrust on infrastructure spending augurs well cement demand.

The company, with its presence across all the zones in the country, is best positioned to take advantage of the revival in cement demand.

As seen earlier, the management’s ability to turn around acquired assets provides confidence in the company and the management expects a similar performance with Century assets.

Torrent Power Ltd

The company is reducing its debt-equity ratio with a focus on the improvement of efficiency. Moreover, improvement in T&D, focus on green power project and commissioning of renewable power plants would give good strength to the company.

Government policy push like emphasis on clean-coal technologies, replacing old plants with new super critical plants, policy on automatic transfer of coal linkage, stricter environmental norms and emphasis on digitalisation will go a long way in energising the coal-based power generation sector.

Expert: Jitendra Upadhyay, Equity Research Analyst at Bonanza Portfolio Ltd

Ashok Leyland

The auto sector has underperformed for the last few quarters as demand slowdowns, sharply impacting the financial performance of automobile companies.

A rate cut could provide some compensation and improve the volume trajectory of the players in both urban and rural markets.

Axis Bank

A rate cut will bring down the cost of funds, which will help in recovering credit growth, expanding the net interest margin (NIM) and improve asset quality.

In short, the rate cut will bring better ratios as well as financial stability to the private lender. The bank’s Vision FY22 expects it to achieve an RoE of >18% by that year.

The asset quality and strategic growth plans from new management give confidence in Axis Bank’s future. Strengthening of balance sheet and healthy margins would be the key going forward. Axis Bank is trading at 2.4x BVPS FY20e

Expert: Jaikishan Parmar, Sr Equity Research Analyst, Angel Broking Ltd

Shriram Transport Finance

The company has been consistently adding a branch in a rural area. Once economic activity pick along with the lower trend of rates, it will help the company to report healthy AUM and NIM.

ICICI Bank

The private lender has reduced bad assets and hiked provisioning for bad assets, which provides comfort. With the reduction in the interest rate, the bank is well placed to capture improvement in credit demand as it has sufficient capital.

Expert: Ritesh Asher (Chief Strategic Officer) at KIFS Trade Capital

DLF

The realty sector is sensitive towards RBI rate cuts. DLF has already restructured its business model and starting a new asset creation cycle for both its development and rental businesses. This rate cut will help boost up liquidity for developer as well as will boost the consumer demand.

Kotak Mahindra bank

The bank has healthy financials with Net interest income up by 23% CAGR, Net profit up by 24% CAGR, Advances up by 29% CAGR, CASA RATRIO up by 44% CAGR and assets growing at 28% CAGR. Additional rates cutes will boost the bank’s profitability further.

State Bank of India (SBI)

SBI is the largest commercial bank in India with over 1/5th market share of the Indian banking sector. Advances growth was higher at 20.9% YoY in Q2FY20 led. Q2FY20 supported by healthy loan growth and retail loans (↑YoY) home loans (↑17.41% YoY), auto loans (↑8.32% YoY) and other personal segment loans (↑5.06% YoY).  With such a vast customer base plus further rate cuts will surely boost the bank's loan book further increasing the profitability.

Maruti Suzuki

The company is all set for swift roll out of BS VI petrol vehicles have reported sales of 3 lakh units across 8 petrol models even if it was on costlier front. With rate cuts and banks passing benefits to customers will increase their buying power and further increasing demand.

Expert: Aasif Hirani – Director, Tradebulls Securities

Tata Motors

Within Auto, Tata Motors is showing fresh signs of strength as the stock closed the day confidently above its 200 DEMA with a positive crossover in its daily RSI.

Indiabulls Housing Finance

The occurrence of Rising Three formation on the daily scale along with good sustenance above its breakout level of 280

Bank of Baroda

Piercing line formation of the daily scale looks healthy post the recent corrective move. The stock is yet to quote within its overbought state when compared via its momentum indicators.

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

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First Published on Dec 5, 2019 02:08 pm
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