Rate sensitive shares gain on rate cut hopes

M&M, Hero MotoCorp, Indiabulls Real Estate,Unitech, ING Vysya Bank and Axis Bank are up 3-5% on BSE.

Shares of rate sensitive sectors such as automobiles, realty and banking are in focus buoyed by hopes of a rate cut by the Reserve Bank of India (RBI) at its policy meet early next month after both core inflation and wholesale price index (WPI) inflation have come down for the month of March.

HDIL, Indiabulls Real Estate and Unitech from real estate, Oriental Bank of Commerce, ING Vysya Bank and Axis Bank from banking and Mahindra and Mahindra, Hero MotoCorp and Maruti Suzuki India from automobiles are trading higher in the range of 3-5% on BSE.

The BSE, banking index bankex, auto and realty index are trading higher by 2% each compared to 1.3% rise in benchmark Sensex at 1335 hours.

Analyst sees scope for policy easing by the RBI in its annual monetary policy owing to the moderating trend in WPI inflation and the recent easing in CPI inflation.

“The RBI’s monetary policy stance has veered towards supporting growth; nonetheless its guidance remains hawkish. We expect the RBI to cut the repo rate by 25bp on May 3, 2013,” says analyst at Angel Broking.

So far in current calendar year 2013, RBI has cut the policy rate by 50bp but monetary transmission has been limited due to the wedge between credit-deposit growth.

WPI inflation for March 2013 moderated to more than a three-year low in March 2013.