In a widely anticipated move, the Monetary Policy Committee (MPC) decided to keep the policy rates unchanged, maintaining the repo rate at 6.5 percent during its meeting on October 6. This decision signals a potentially extended pause in response to the global economic landscape, along with a note of caution. Furthermore, the central bank kept its economic growth forecast and inflation projections for FY24 unchanged.
Market experts anticipate the policy rate to remain stable throughout the current fiscal year (FY24). The RBI is closely monitoring inflation, considering factors such as reduced pulse cultivation, declining reservoir levels, El Niño conditions, and fluctuating global energy and food prices. Although economic growth remains robust, the CPI inflation rate eased from 7.44 percent to 6.83 percent in August, still exceeding the RBI’s 4 percent target (with a range of +/- 2 percent).
The MPC explained its decision by noting that the cumulative 250 basis points policy repo rate hike is still impacting the economy. Thus, while keeping the policy repo rate at 6.50 percent, the MPC remains prepared for timely policy adjustments as needed.
The MPC emphasized its commitment to aligning inflation with the target and anchoring inflation expectations. It also highlighted its focus on withdrawing accommodation to gradually align inflation with the target while supporting growth.
Radhavi Deshpande, President & Chief Investment Officer at Kotak Mahindra Life Insurance, commented, “MPC’s decision to maintain rates and stance suggests a prolonged pause with caution due to the global economic environment. The target inflation rate of 4 percent was reiterated, and MPC will continue to rely on data while incremental liquidity measures remain the base case.”
Following the RBI’s announcement, the market exhibited a positive response. On October 6, the Nifty50 surged by 95 points to 19,640, and the BSE Sensex climbed 322 points to reach 65,953, with gains across all sectors. Additionally, market volatility decreased, as indicated by the India VIX falling by 5.2 percent to 10.37 levels.
The Bank Nifty rose by 133 points to 44,346, while the Nifty Auto and Realty indices saw gains of 0.4 percent and 1 percent, respectively.
Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities, noted, “The Governor’s statement did not contain any surprises. In some cases, no news can be good news, which explains the slightly positive market reaction. However, the RBI remains concerned about the global macroeconomic environment.”
Tighter monetary conditions are causing a slowdown in the global economy. The US 10-year bond yields have risen to 4.74 percent, and the US Dollar index has appreciated to 106.44 levels.
Apurva Sheth added, “While there are signs that interest rates may have peaked, they are not declining rapidly. It remains to be seen how the world adapts to higher interest rates, a situation not seen in the past 22 years. Therefore, the RBI is likely to adopt a cautious approach as the global economic landscape evolves.”
With this context in mind, we have compiled a list of rate-sensitive stocks that may present attractive investment opportunities at current levels or during market dips, over a two to three-week timeframe. The expected returns are calculated based on closing prices as of October 5.
Stock Recommendations by Experts:
Expert: Jigar S Patel, Senior Manager – Equity Research at Anand Rathi
- HDFC Bank
- Buy | LTP: Rs 1,544 | Stop-Loss: Rs 1,450 | Target: Rs 1,600 | Expected Return: 3.6 percent
- Technical Analysis: After reaching a high of Rs 1,670 on September 15, 2023, HDFC Bank has exhibited a downward trend. The stock has found support around Rs 1,485–1,500 and displayed a Bullish Engulfing candlestick pattern, followed by bullish divergence near the support zone.
- Punjab National Bank (PNB)
- Buy | LTP: Rs 77.45 | Stop-Loss: Rs 60 | Target: Rs 95 | Expected Return: 23 percent
- Technical Analysis: PNB has experienced a substantial rally in 2023, rising from Rs 45 to approximately Rs 83. While in profit-booking mode, entering the stock around Rs 70-74 with a stop-loss at Rs 60 is suggested for an upside target of Rs 95.
Expert: Vidnyan Sawant, AVP – Technical Research at GEPL Capital
- AU Small Finance Bank
- Buy | LTP: Rs 720 | Stop-Loss: Rs 680 | Target: Rs 785 | Expected Return: 9 percent
- Technical Analysis: AU Small Finance Bank has shown positive momentum and formed a Double Bottom price pattern around Rs 690. Additionally, it consistently finds support at the 34-week exponential moving average (EMA), accompanied by positive hidden divergence in the relative strength index (RSI).
- Bajaj Finance
- Buy | LTP: Rs 7,850 | Stop-Loss: Rs 7,725 | Target: Rs 8,175 | Expected Return: 4 percent
- Technical Analysis: Bajaj Finance has displayed a strong upward trend, maintaining higher highs and higher lows. It also rebounds consistently from the 13-day exponential moving average (EMA), while the RSI remains above 60, indicating substantial positive momentum.
Expert: Avdhut Bagkar, Derivatives & Technical Analyst at StoxBox
- State Bank of India (SBI)
- Buy | LTP: Rs 593.4 | Stop-Loss: Rs 580 | Target: Rs 640 | Expected Return: 8 percent
- Technical Analysis: SBI’s support at Rs 564, represented by its 200-SMA, suggests a bullish bias. The stock needs to break above Rs 605 for a significant upside. Traders are advised to adopt a bullish stance, with a stop-loss at Rs 580 and a target of Rs 640.
- Manappuram Finance
- Buy | LTP: Rs 142.3 | Stop-Loss: Rs 130 | Target: Rs 155 | Expected Return: 9 percent
- Technical Analysis: Despite facing challenges breaking the Rs 155 barrier, Manappuram Finance has exhibited resilience, supported by the accumulation zone of Rs 135 to Rs 130. Risk-tolerant investors may consider entering with a stop-loss at Rs 130, targeting Rs 155.
Expert: Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd.
- Larsen & Toubro
- Buy | LTP: Rs 3,115 | Stop-Loss: Rs 2,930 | Target: Rs 3,340 | Expected Return: 7 percent
- Technical Analysis: Larsen & Toubro has broken out of a triangle formation on the daily chart, signaling a bullish trend. It has retested its previous breakout level around Rs 2,960 and is now moving towards Rs 3,200. The stock is trading above important moving averages, with positive indicators.
- Prestige Estates Projects
- Buy | LTP: Rs 671 | Stop-Loss: Rs 600 | Target: Rs 780 | Expected Return: 16 percent
- Technical Analysis: Prestige Estates Projects has broken out of an 18-month consolidation with strong weekly volume. On the daily chart, it has broken a triangle formation with substantial volume. The stock looks promising, trading above crucial moving averages, supported by favorable technical indicators.
Please note that these stock recommendations are based on Technical Analysis and market conditions. Before making any investment decisions, investors should conduct their research and consider their risk tolerance.
