Shares of interest-rate sensitive sectors have bounced back from intra-day lows and are trading higher by up to 6% after the Reserve Bank of India’s (RBI) said it expects inflation pressure to ease in the next few months, raising the hopes of a rate cut as early as January.
Allahabad Bank, Bank of India, Syndicate Bank and SBI are trading higher by over 1%, bouncing back over 4% each from their intra-day lows on the BSE. Unitech, Prestige Estates, DLF and HDIL from real estate and Tata Motors, and M&M from automobile sector are up between 1-6%.
“If the macro conditions remain supportive, RBI may start cutting repo rates in the January policy statement and pace of cuts could be faster and sharper after waiting for this long. Once RBI starts with its rate-cut cycle, it will not be just 25 basis points but it could be 50-75 basis points by the end of fourth quarter,” said Deepak Jasani, head-retail research at HDFC Securities.
"The RBI will cut the repo rate in the Jan-Mar Quarter. RBI’s Commentary is starting to get more dovish and supportive of growth. Also it guides to lower inflation in FY14,” said Gautam Trivedi, managing director & head of equities, Religare Capital Markets.
