Interest rate sensitive shares in focus ahead of RBI policy

Nifty Auto, Nifty Realty and Nifty PSU Bank index were up nearly 1% each, as compared to 0.19% rise in Nifty50

Interest rate sensitive shares from the sectors such as banking, automobiles and real estate were in focus ahead of the Reserve Bank of India (RBI) Governor Urjit Patel-led Monetary Policy Committee (MPC) meeting due later in the day. 

A majority of the nearly 60 analysts polled by Reuters predict the RBI will cut the repo rate by 25 basis points (bps) to 6%, the lowest since November 2010, while six predicted a deeper 50 bps cut. CLICK HERE TO READ FULL REPORT.

"Apart from the policy rate outcome, it will be an important guidance on the RBI’s stance on both liquidity management and possibly its growth outlook especially after the demonetisation drive," said HDFC Bank in a research note. 

The bank believes even as inflation remains in a comfortable territory of around 4% (March-end forecast of 4.6%), the RBI could hold back on cutting the policy rate by a considerable margin in today's meeting.

"If the domestic liquidity situation and thus the transmission process normalizes by year-end, and if there are no global hiccups, for example, a more hawkish stance from US Federal Reserve and escalating political uncertainty in the euro zone, there could be another rate cut in the February meeting," it said.

Investors will also expect the RBI to review its decision on the incremental Cash Reserve Ratio (CRR) requirement introduced after the demonetisation announcement.  

Meanwhile, Eicher Motors, Hero MotoCorp, Maruti Suzuki India, Mahindra & Mahindra and Tata Motors from automobiles, State Bank of India (SBI), ICICI Bank, YES Bank, Federal Bank and Bank of Baroda from banking were up around 1% each on the National Stock Exchange (NSE).

DLF, Prestige Estates, Unitech, Housing Development & Infrastructure (HDIL) and Oberoi Realty from the real estate sector were up in the range of 1%-4% on the NSE.

At 10:34 am; Nifty Auto, Nifty Realty and Nifty PSU Bank index were up nearly 1% each, as compared to 0.19% rise in the benchmark Nifty50 index, while Nifty Bank index was up 0.35%.

Since November 8, post demonetization, most of these sectors – Nifty Realty (down 16%), Nifty Auto (11%) and Nifty Bank (5.5%) had underperformed the market by falling more than 5% each, against 4.7% decline in the benchmark index till yesterday. Nifty PSU Bank index, however, buck the trend and was up 2.9% during the same period.