Short Call | What keeps the RBI up at night? Macrotech Developers, Bandhan Bank, Kaynes Tech in focus

Short Call

While the consensus might be pegging their hopes for an rate cut from the Reserve Bank of India for the December meeting, some hope that a dove might flutter among hawks and that October might see a change in stance.

The upcoming meeting will be the first meeting this year where at least a part of the market expects a rate cut. There’s also more factors than ever for the RBI to digest.

The Federal Reserve also opened its doors to rate cuts, finally allowing EMs across the world to consider a faster monetary policy easing cycle given the front-loaded cut of 50 basis points coming in from the mother markets.

The Reserve Bank of India will be loath to forget that the GDP for the first quarter of the current fiscal year came in 30 basis points below the central bank’s estimate of 7 percent.

Corporate profits, auto sales, or cement volumes data points hint at sluggishness in the economy and slowing momentum. Sure, some of this can be attributed to the effects of ‘higher for longer’ rates, but what about an uneven private capex recovery, stuttering exports or contracting real rural wage growth?

Our larger neighbors to the north unveiled a massive stimulus aimed to boost their economy and tackling their structural issues. Sure, Barclays noted that India's economy is relatively insulated from China, though a stronger Chinese economy would bode well for global growth and therefore would be somewhat of a tailwind for India. However, so far, we’ve seen a knee-jerk reaction of fleeing outflows, funds moving from India to China faster than you can say ‘bhai, bhai’.

So given all of this, what does the RBI do? Will it be proactive, will it keep waiting and watching? Will the new members dissent, will new voices be heard? For now, only the RBI holds the answers, and we'll know more on October 9. Until then, it's anyone's guess.

Macrotech Developers (Rs 1,181, +0.7%)

Stock gained after company clocked Q2FY25 pre-sales of Rs 4,290 crore bn, its best-ever quarterly pre-sales

Bull Case: Macrotech Developers' geographical diversification, rapid inventory liquidation, and monetisation of annuity assets can accelerate debt reduction. The industrial parks business at Palava adds another growth avenue, enhancing revenue and financial stability, positioning the company for sustained growth.

Bear Case: Macrotech's heavy reliance on MMR exposes it to regional risks and limits growth. Interest rate uncertainties and a lack of meaningful debt reduction could elevate investor concerns about its financial stability, potentially undermining the company's long-term growth prospects.

Bandhan Bank (Rs 184.5, -1.5%)

Shares slipped despite Jefferies' buy call on the counter.

Bull Case: The bank's deposits saw a 27 percent year-on-year increase, driven by a significant 58 percent rise in bulk deposits.

Bear Case: The loan-to-deposit ratio (LDR) fell by over 260 basis points quarter-on-quarter to 92 percent, a level higher than most peers, which could potentially hinder short-term loan growth.

Kaynes Tech (Rs 4,87.80,-3.5%)

Stock fell as Jefferies sees 13 percent downside potential.

Bull Case: Kaynes’ acquisition of Iskraemeco will aid its smart metering technical capabilities as it aims to become largest contract manufacturer of smart meters in India, said KIE. Smart meter business to contribute 10% revenue in FY25, lifting overall topline.

Bear Case: Kaynes' focus on being an EMS solution provider could face challenges with potential smart meter customers following its acquisition of the Iskraemeco brand, making client relationships crucial. If Kaynes takes up projects as an Advanced Metering Infrastructure Service Provider, it may face higher working capital risks due to the complexities of managing smart meter installations.