Rate sensitive stocks gain ahead of RBI policy meet on Tuesday
NEW DELHI: Rate-sensitive stocks gained momentum in an otherwise weak market on Monday, ahead of the Reserve Bank of India’s policy review on Tuesday.
The Reserve Bank of India (RBI) is likely to cut the repo rate by 25 bps in its mid-quarter policy review on December 18 as pick-up in reforms, fall in headline inflation number and weaker GDP growth make a strong case for the central bank to move earlier than its previous guidance, Goldman Sachs said in a report on Monday.
BSE Auto Index was trading 0.7 per cent higher and was among the highest gainers in the BSE sectoral indices, followed by the BSE BSE Realty Index, which gained 0.65 per cent, while the BSE PSU Index was up 0.4 per cent at 01:30 pm.
Among individual stocks in the auto sector, Maruti Suzuki was trading 1.6 per cent higher at Rs 1499, Bajaj Auto gained 1.3 per cent to Rs 2109, M&M was trading 1 per cent higher at Rs 959 and Tata Motors moved 0.9 per cent higher to Rs 294.50.
Among individual stocks in the realty sector, Ananat Raj Industries was trading 2.9 per cent higher at Rs 96.30, Oberoi Realty gained 2.5 per cent to Rs 287.60, IndiaBulls Real Estate moved 1.7 per cent higher at Rs 74.65 and Phoenix Mills was trading 0.9 per cent higher at Rs 247.
Goldman expects the RBI to deliver a 25 bps cut each in December and January, relative to its earlier view of 50 bps in March. This view is largely driven by the downside surprise in inflation in October and November.
“We believe there are several reasons for the RBI to act now as against the market expectations, as both growth and inflation are surprising on the downside relative to the RBI’s forecasts,” the investment bank said.
The November WPI inflation print came in at 7.24 per cent, significantly below Bloomberg consensus expectations of 7.6 per cent. More importantly, core inflation came in at 4.5 per cent, down from 5.2 per cent in the previous month. Clearly, core inflation has come within the RBI’s comfort zone.