Rajat Rajgarhia, Director –Research, Motilal Oswal Financial Services spoke to Jinsy Mathew on RBI credit policy and its impact on the markets.
How do you see the markets reacting to RBI announcement in the short term?
Markets were expecting a rate cut but RBI continuous to focus on inflation which is valid. However, growth becomes a concern in such a situation. The only silver lining is the interest cost coming down which will be of some relief for industries. Taking cues from current stand, markets will continue to be range bound around current levels. In order to break from this range a catalyst will be required which may come in, in the form of restoration of growth momentum by resolving some of problems faced by the power, infrastructure and coal spaces. The reforms announced by the Government successfully bought the markets thus far.
What is your take on the rate sensitives?
With regards to the banking sector – the Q2 results once again bought to fore the difference between a public and a private sector bank. According to the numbers posted, private sector banks continue to remain strong with strong asset quality while the opposite can be said about public sector banks. Also, the macros are further weighing down the public sector banks. I would say it would be prudent to wait for another one to two quarters before buying into banks as we may be in for some negative surprises.
With respect to realty and capital goods, the broader view is negative as the problems plaguing these pockets continue to remain unresolved. However, there are some individual names like L&T from the capital goods space which would continue to buck the broader trend.