The Monetary Policy Committee (MPC) on expected lines changed its policy stance to 'neutral' from 'calibrated tightening' in its meeting on Thursday and also slashed repo rate by 25 bps.
Consequently, the reverse repo rate under the liquidity adjustment facility or LAF stands adjusted to 6.0 percent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.5 percent.
This was the first policy by the new RBI Governor Shaktikanta Das, who also heads the monetary policy committee. The decision to change the monetary policy stance was unanimous. The next meeting of the MPC is scheduled from April 2 to 4, 2019.
“As liquidity pressures abate, borrowing rates and liquidity conditions are likely to improve. Sentimentally, it is a big positive for the broader market,” Vivek Ranjan Misra, Head of Fundamental Research, Karvy Stock Broking told Moneycontrol.
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 the rate cut.
Jayant Manglik, President Religare Broking told Moneycontrol that top sectors which are likely to benefit from the monetary easing are infrastructure and real estate. The rate cut will not only help 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. Among 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 from RBI's rate cut in February policy 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.
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.
Analyst: DK Aggarwal is Chairman & Managing Director of SMC Investments & Advisors
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 8-12 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.
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 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.
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.
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.
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.
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