The monetary policy announced by the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on April 8 was largely on expected lines with the repo and reverse repo rate left unchanged at 4 percent and 3.35 percent, respectively, with an upward revision in inflation and cut in growth forecast, citing the spike in commodity prices due to supply disruptions caused by the Ukraine-Russia war.
The central bank has maintained its ‘accommodative stance’ while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.
Analysts say the RBI has chosen to support growth over inflation by keeping the rates at the same level. “We believe it is a sensible choice because for India to attract foreign capital it will have to focus on generating growth. It has tried its best to balance the sharp increase in inflation forecast and a lower GDP growth forecast,” said Abhay Agarwal, founder and fund manager at Piper Serica.
He believes that the RBI does not want to signal a series of rate hikes that will increase the cost of borrowing and negatively impact the nascent recovery in consumer sentiment, manufacturing and rural income. “The hope is that with supply bottlenecks easing inflation will trend down.”
Rate-sensitive stocks including banks, financial services, auto and realty largely remained flat as the policy was on expected lines.
After the sharp increase in oil prices, the key element in the import bill, the RBI has lowered its GDP forecast to 7.2 percent for FY23 from 7.8 percent earlier, while significantly raising the full-year CPI inflation forecast to 5.7 percent from 4.5 percent earlier.
The central bank assumed oil price at $100 a barrel for forecasting economic growth and CPI inflation. “This implies that growth and inflation can be better if crude declines sharply if the war hopefully ends early,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
The MPC is of the view that since the February meeting, the ratcheting up of geopolitical tensions, generalised hardening of global commodity prices, the likelihood of prolonged supply chain disruptions, dislocations in trade and capital flows, divergent monetary policy responses and volatility in global financial markets are imparting sizeable upside risks to the inflation trajectory and downside risks to domestic growth.
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Given the cross-current of multiple headwinds, “our approach needs to be cautious but proactive in mitigating the adverse impact on India’s growth, inflation and financial conditions”, said RBI governor Shaktikanta Das while addressing a press conference.
He added that the RBI is, however, reassured by the strong buffers that India has built over the past few years, including large foreign exchange reserves, significant improvement in external sector indicators and substantial strengthening of the financial sector, all of which would help weather this storm. “Once again, we in the RBI stand resolute and in readiness to defend the economy and navigate out of the current storm.”
Das rightly emphasised India’s macro strengths, pointing to the improvement in the external situation helped by record exports, ample forex reserves of $606.5 billion and strengthening of the financial sector, said Vijayakumar.
The RBI has introduced the standing deposit facility (SDF) as a new tool to absorb liquidity. The SDF rate, which will now be the floor of the liquidity adjustment facility corridor, will be at 3.75 percent.
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We have collated a list of rate-sensitive stocks that may be a good buy at current levels or on dips from a two to three weeks’ perspective. Returns are calculated based on April 7 closing price:
Expert: Malay Thakkar, Technical Research Associate at GEPL Capital
ICICI Bank: Buy | LTP: Rs 748.55 | Stop-Loss: 695 | Target: Rs 860 | Return: 15 percent
On long-term charts, ICICI Bank is moving in a strong uptrend with higher highs and higher lows formation.
After a nearly 25 percent correction from the life-high levels of Rs 864, ICICI Bank took support at its 38.2 percent retracement level (Rs 640) and the stock has seen a sharp bounce since then.
On the weekly charts the stock has surpassed its 20-week SMA or simple moving average (Rs 746) and now trades at the five-week high. The weekly RSI or relative strength index indicator is moving higher after forming a bullish hinge near the 40 mark.
Going ahead we can expect the stock price to move higher towards Rs 820 followed by Rs 860 level. We recommend a stop-loss of Rs 695 for this trade.
Bank of Baroda: Buy | LTP: Rs 119.20 | Stop-Loss: Rs 110 | Target: Rs 142 | Return: 19 percent
Bank of Baroda is moving in an uptrend with higher highs and lows since March 2020. In the current week, the stock has broken above the previous swing high (Rs 118) with an uptick in volumes.
On the daily charts, we see the stock is moving out of a rounding pattern which is an accumulation pattern.
The RSI indicator on all timeframes i.e., daily, weekly and monthly, is above the 60 mark indicating bullish momentum in the prices.
Going ahead we expect the prices to move higher towards Rs 132 followed by Rs 142. We recommend a stop-loss of Rs 110 on daily closing basis.
Expert - Rohan Patil, Technical Analyst at Bonanza Portfolio
M&M Financial Services: Buy | LTP: Rs 169.80 | Stop-Loss: Rs 161.50 | Target: Rs 184 | Return: 8 percent
M&M Financial Services has given a smart V-shaped reversal rally on the daily chart and has given more than 30 percent in just one month indicating bulls are back in action. The prices have given a falling trend line breakout on the daily chart which indicates a positive momentum is likely to continue.
The momentum oscillator RSI (14) is reading in a higher-high, higher-low formation and has also given a horizontal trend line breakout above 60 levels on the daily timeframe.
Prior breakout prices consolidated for almost seven trading sessions and we witnessed above-average volume activity during that period, indicating accumulation stage for the counter.
While looking at the overall price formation and fresh breakout, we expect prices to trade higher towards Rs 184 levels.
Axis Bank: Buy | LTP: Rs 792 | Stop-Loss: Rs 760 | Target: Rs 847 | Return: 7 percent
Axis Bank has been outperforming its peer stocks consistently for the past few weeks and has given a downward sloping trend line breakout on the daily timeframe.
After touching the lower band of the trend line which is near Rs 660 levels, the counter closed above its five-week high and has given handsome returns of 20 percent in just one month.
On March 30, prices closed above its 21-, 50- and 100-day exponential moving averages and since then prices never retested below its averages and continued to trade higher. On the broader timeframe, prices are moving out of a symmetrical triangle pattern which is a strong bullish signal.
While looking at the overall price formation and fresh breakout, we are expecting prices to trade higher towards Rs 847 levels.
Expert: Mehul Kothari, AVP - Technical Research at Anand Rathi Shares & Stock Brokers
HDFC Bank: Buy | LTP: Rs 1,517 | Stop-Loss: Rs 1,450 | Target: Rs 1,625 | Return: 7 percent
After the recent correction, HDFC Bank is hovering near the 61.8 percent retracement level of the entire rally which started from Rs 1,400 to Rs 1,700. This support coincides with the gap area formed due to the merger news.
The support zone is also the placement of the Kijun of Ichimoku indicator. Hence there is a high probability that the stock might resume its uptrend.
Thus, short-term traders are advised to buy the stock in the range of Rs 1,515-1,505 with a stop-loss of Rs 1,450 for the upside potential target of Rs 1,625 in the next two to three weeks.
Sunteck Realty: Buy | LTP: Rs 480 | Stop-Loss: Rs 450 | Target: Rs 530 | Return: 10 percent
The stock is on the verge of a massive breakout which might get confirmed above the Rs 500 mark. At this juncture, the trend is very strong and the price action indicates that the possibility of the breakout is very high.
In addition, at this juncture the reward-to-risk ratio looks highly lucrative to go long. Thus, one can accumulate the stock near Rs 480 with a stop-loss of Rs 450 for an upside target of Rs 530 in the two to three weeks.
Expert: Vinay Rajani, CMT and Senior Technical & Derivative Analyst at HDFC Securities
M&M Financial Services: Buy | LTP: Rs 169.80 | Stop-Loss: Rs 164 | Target: Rs 180 | Return: 6 percent
The stock has been consolidating in a narrow range for the last three sessions. On April 1, the stock broke out from the bullish “flag” pattern on the daily charts.
The NBFC sector has been outperforming for the last couple of weeks. Indicators and oscillators like DMI (directional movement index), RSI and MACD or moving average convergence divergence have been showing strength on the medium-term charts. The stock is placed above all important moving averages.
Piramal Enterprises: Buy | LTP: Rs 2,354 | Stop-Loss: Rs 2,280 | Target: Rs 2,500 | Return: 6 percent
The stock has been broken out from the bullish “flag” pattern on the daily chart. In a single session of April 7, it surpassed the 50-, 100- and 200-day EMA (exponential moving average) resistance with a jump in volumes.
RSI, DMI and MACD indicators have turned bullish on the daily chart. Indicators and oscillators have turned bullish on the daily charts.
Expert: Santosh Meena, Head of Research at Swastika Investmart
Axis Bank: Buy | LTP: Rs 792 | Stop-Loss: Rs 764 | Target: Rs 840 | Return: 6 percent
The counter is seeing strong bullish momentum where it is breaking out downward trend line resistance that may fuel further strength towards Rs 815-840 levels.
On the downside, Rs 765 is the immediate support while 200-DMA around Rs 750 is a major support level. ADX (average directional index) is trading above the 30 mark supporting the strength of the current uptrend whereas MACD is also trading above the centre line. Momentum indicator RSI is also positively poised above the 60 mark.
Can Fin Homes: Buy | LTP: Rs 668 | Stop-Loss: Rs 640 | Target: Rs 720 | Return: 8 percent
The counter has come above the trend line resistance and is now breaking out a double-bottom formation on the daily chart.
We can expect a move towards the previous swing high of Rs 720 while Rs 640 is an immediate support level. Momentum indicators are also positively poised to support the current momentum.
Disclaimer: The views and investment tips expressed by investment 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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