Rate cut key beneficiaries: UBS picks LIC Housing, HDFC Bank

According to Gautam Chhaochharia of UBS, the initial phase of rate cuts is not necessarily bullish for Indian equity markets as it typically coincides with a slow growth phase.

Ultimately, lower inflation and rates should help balance sheet repair and set the stage for a medium-term recovery in growth, helping drive earnings recovery, he says, adding this should potentially help rerate markets, as was the case in the early 2000s.

He further says LIC Housing Finance and HDFC Bank remain top picks and would be key beneficiaries from this policy action. Positive impact on other consumer discretionary segments like passenger cars and durables may likely underwhelm market expectations though, he adds.

He remains neutral on auto 4-wheelers and consumer discretionary, with no stocks in most preferred list from these sectors.