The Reserve Bank of India's monetary policy committee (MPC) left key interest rates unchanged as expected and maintained an ‘accommodative’ stance in the last policy of the year 2020.
Governor Shaktikanta Das added that the RBI will continue to respond to global spillovers with the liquidity management tools. “We will use instruments available at an appropriate time as needed. Real GDP growth for 2021 seen at -7.5 percent against earlier projected -9.5 percent and H2 is expected to show positive growth,” he said at a press conference.
Outlook for inflation has turned adverse and price pressures are spreading. CPI inflation is seen at 6.8 percent for Q3FY21 and projected CPI inflation at 5.8% for Q4FY21. For H1FY22, projected CPI inflation is seen at 5.2-4.6% with risks broadly balanced.
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"Emphasising the multi-speed upturn in the economy, the central bank has announced the extension of on tap TLTRO to stressed sectors. There is no market-moving announcement in the policy, but the overall tone is positive."
Interest rates are likely to remain low for some more time and hence focus will be on rate-sensitive sectors such as banks, real estate, NBFCs, companies with a high debt burden, and automobile as well as two-wheeler stocks.
“With reality sector gearing positive momentum, Oberoi Reality could be a good investment idea for long-term horizon as interest rates are at an all-time low and Oberoi Reality, being a brand in real estate sector, will benefit from the same,” Nitin Shahi, Executive Director at Findoc told Moneycontrol.
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“Furthermore, GDP is expected to recover in upcoming months and so stocks like SAIL, which is currently trading at a very cheap valuation, could be an attractive bet. In addition, sectors which can get benefit from the pandemic recovery would be auto,” he said.
In the two-wheeler space, Shahi suggested stocks like Hero MotoCorp and Bajaj Auto, market leaders in their segment, will benefit the most from the economic recovery in the rural areas.
We have collated a list of top 11 rate-sensitive stocks that are attractive buys even at current levels:
Expert: D K Aggarwal, CMD of SMC Investments and Advisors Limited
The management has guided for sustaining current margins and some improvement in loan growth, going ahead. The bank remains cautiously optimistic in terms of the asset quality outlook going ahead in the current year.
The bank is conscious that the stresses caused by COVID is going to have an impact but the bank believes the slippage ratio will be lower than last year as it is not exposed to many chunky potential NPAs.
According to the management, collection efficiency improved to 91 percent close to the 94 percent reported last year, with loans that were under moratorium until August reporting 87 percent collection efficiency.
NMDC Limited
The company has positioned itself for strategic diversification and has witnessed continued profitable growth. It is diversifying into steel-making and has undertaken several capital intensive projects to modernise and increase capacities to retain its domestic leadership and has also forayed overseas successfully.
The government has charted a road map to augment India's steel production capacity to 300 Mtpa by 2030-31. To fulfill this vision, NMDC proposes to act as a facilitator and developer of greenfield steel plants by creating Special Purpose Vehicles (SPVs) in the mineral-rich states of Jharkhand and Karnataka.
NMDC had planned capex of around Rs 1,860 crore in FY21, which is mainly towards setting up of a 3-million tonne steel plant in Chhattisgarh. The company expects to commence operations from 4QFY21.
Polycab India Limited
The company would be able to gain market share in the FMEG segment as it keeps on investing in increasing reach, brand visibility, and into new products.
Recently, it has reported stronger-than-expected numbers led by a healthy revival in the domestic B2C segment and exports. According to the management, the company is refining its strategy to capture emerging trends and succeed in the transforming world.
Government reforms and initiatives will certainly help the broader economy and people. The company is a true example of a Made in India brand that will continue to contribute to the nation's growth and the government's vision to make India a self-reliant economy.
Tata Consumer Products Limited
The company has recorded good revenue and profit growth in Q1FY21 due to an increased demand in some categories, strong marketing campaigns and adopting new routes to reach the end-consumer.
According to the management, the integration of food and beverages businesses is progressing well and would unlock significant synergy benefits. In its international markets, the company is investing in its core brands and driving innovations in the tea and coffee segment.
Moreover, the company is also strengthening key processes across the organisation to scale up capacity and build a future-ready firm.
According to the management, the company along with its subsidiaries and affiliates continues to manufacture and supply essential food and beverage items in domestic and international markets in the current COVID-19 environment.
The demand for the food and beverage products for in-home consumption was buoyant, whereas segments in out of home consumption were adversely impacted.
Prestige Estates Projects Limited
Considering its attractive valuation which is supported by a strong portfolio of operational rental assets, thereby reducing the risks associated with the residential segment and a planned increase in commercial and retail properties going forward.
Also, an encouraging quarter on collections plans to tap new geographies like Mumbai, Pune, NCR, and Goa. Moreover, after the finalisation of the Blackstone deal, the Prestige group will utilise the fund raised through this monetisation to partly retire its debt and future expansion.
According to the management, it expects that the rest of the 2 quarters, Q3 and Q4, will also be good and better than Q2. It has so far completed 247 projects covering 134 million sq ft area.
During the Q2FY21, its total income stood at Rs 1,916.7 crore in the second quarter of this financial year as against Rs 1,962.7 crore in the corresponding period of the previous year.
Expert: Dinesh Rohira, Founder, CEO, 5nance.com
The strong uptick in the pan-India residential realty sales growth at 60 percent on a sequential basis during the Q2FY21 is likely to aid sentiment among property buys in the coming quarters.
The lower interest rate, which is likely to remain for a good period, will help housing finance companies to grow their loan book.
Further, the lower cost of capital will also aid the profitability of HDFC Ltd in coming years which makes it a good long-term play.
Accessibility to quick retail finance with lower interest rates coupled with a resilient rural sentiment even during the pandemic is likely to aid growth in demand for tractors in the domestic market.
Further, a better monsoon for consecutive years leading to better output, and the government’s strong focus on a rural-based economy along with minimum support price plays well for Escort for a long-term investment.
The revival in demand for the real estate property driven by a lower interest rate regime coupled with favorable financing costs will help DLF deliver robust performance.
Strong pipeline of projects across diverse geographies in different segments and affordability of property after a significant correction will help drive growth in coming periods.
Expert: Atish Matlawala, Sr Analyst, SSJ Finance & Securities.
Maruti Suzuki
Maruti Suzuki is the largest passenger vehicle company in India, having a presence across all categories. We expect volume growth driven by new model launches, the transition to BS-VI and more people preferring to travel by own vehicle due to COVID fears.
Cost rationalisation will drive margins. Maruti Suzuki will be the biggest beneficiary of lower interest rates. Hence, we recommend it with medium to long-term horizon.
TVS Motors is witnessing a strong recovery in domestic demand with retail sales turning positive in the initial festive days. Export demand has picked up strongly with strong double-digit growth reported in November 2020.
We expect a strong recovery from FY2022, driven by normalisation of economic activity. Margins are expected to improve driven by operating leverage and cost-control measures. We recommend "buy" with a medium to long-term horizon.
Voltas is gaining traction in its Unitary cooling products (UCP) also its electro-mechanical projects and services performance is improving. Voltas is the market leader in AC and a lower interest rate scenario will help improve its sales. We recommend "buy" with a medium to long-term horizon.
Disclaimer: The views and investment tips expressed by 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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