RBI hikes repo rate, lowers growth forecast: 10 rate sensitive stocks stand as good bets

The market reacted negatively to the policy, may be due to increasing possibility for further rate hikes in next policy meeting and lowering the growth forecast

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The Reserve Bank of India’s Monetary Policy Committee on December 7 raised the repo rate to the highest level since August 2018, which was largely on the expected lines. The panel also decided to remain focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.

The repo rate, the rate at which the central bank (RBI) lends money to commercial banks, has been raised by 35 basis points to 6.25 percent, from 5.9 percent earlier. Jayanth R Varma voted against the repo rate hike, while the rest MPC members were in favour of rate hike.

The moderation in rate hike (from 50 bps hike in earlier meetings) was largely on the expected lines, given the inflation above its targeted zone and following the Fed path (which already indicated balanced approach between containing inflation and fostering growth). The policy stance may indicate another rate hike on the cards in the February 2023 meeting, whereas the central bank lowering its growth forecast for the current financial year, given the global headwinds was also on expected lines, experts said.

“Markets were expecting a slight moderation in the stance but it continues to be the withdrawal of accommodative stance while supporting growth. This may be interpreted that further action on the rate front can still happen before arriving at the terminal rate,” Ajit Banerjee, Chief Investment Officer at Shriram Life Insurance, said.

Pankaj Pathak, Fund Manager – Fixed Income at Quantum AMC also believes a continuation of the stance as “withdrawal of accommodation” indicates that the rate hiking cycle in India is by no means over. “We would expect at least another 25 basis points of a rate hike in February next year before we get any closer to the terminal rate,” he said.

The Reserve Bank of India has reduced its FY23 GDP forecast to 6.8 percent from 7 percent, but retained the CPI inflation forecast unchanged at 6.7 percent. CPI inflation for October eased to a three-month low of 6.77 percent, down from 7.41 percent in September.

The lowering full-year GDP growth forecast is predominantly factoring in the prevailing global headwinds and would likely to impact India’s GDP growth, Banerjee said, adding the inflation forecasts for the residual period of FY23 have been marginally increased from the previous forecast in view of the higher inflation level still prevailing.

The market reacted negatively to the policy, maybe due to increasing possibility for further rate hikes in next policy meeting and lowering growth forecast. The Nifty50 fell 50 points to 18,593, while the BSE Sensex was down more than 100 points at 62,512.

Follow LIVE Updates of the RBI Monetary Policy decision here

We have collated a list of rate-sensitive stocks that may be a good buy at current levels or on dips from a two to three weeks’ perspective. Returns are calculated based on December 7 closing price:

Expert: Vikas Jain, Senior Research Analyst of Technical and Derivative at Reliance Securities

Bajaj Finance: Buy | LTP: Rs 6,698 | Stop-Loss: Rs 6,430 | Target: Rs 7,450 | Return: 11 percent

The stock is holding its 100-week SMA (simple moving average) and trading sideways in an inside range on the weekly charts.

It has completed his time and price correction over the past 13 weeks from its recent high of Rs 7800 level it tested in September 2022.

A stable move above its key band of daily moving averages will support a strong up-move and risk reward remains in favour from current levels.

Therefore, we recommend directional long position for a target of Rs 7450 with a stop-loss of Rs 6,430.

Shriram Transport Finance Corporation: Buy | LTP: Rs 1,326 | Stop-Loss: 1,225 | Target: Rs 1,530 | Return: 15 percent

The stock has crossed its 200 day average with strong volumes and positive price performance over the past few days.

It has consolidated well in a narrow range over the past few weeks and given an upward breakout in the current week.

The key technical indicators are in favour of bulls on the long term as well as medium term time frame charts.

Therefore, we recommend directional long position for a target of Rs 1,530 with a stop-loss of Rs 1,225.

Expert: Jigar S Patel, Senior Manager- Technical Research Analyst at Anand Rathi Investment Services

Macrotech Developers: Buy | LTP: Rs 1,056 | Stop-Loss: Rs 999 | Target: Rs 1,155 | Return: 9 percent

For the last 4 months approximately, the said counter is making lower highs and lower lows structure. Recently it has started changing its structure by making higher highs and higher lows, and also it broke its trendline (refer to the chart).

At the current juncture, it has sustained above 200 DEMA (day exponential moving average) high low band (refer to the chart). What is more interesting is that buying volume is picking up from lower levels. In the previous trading session, we witnessed some selling pressure with almost negligible volume (refer to the chart).

On the indicator front, daily DMI (directional movement index) has given a bullish cross along with daily MACD (moving average convergence divergence) displays flip flop structure above zero line hinting upside in the counter. One can buy in the range of Rs 1,045-1,060, with target at around Rs 1,155 and stop-loss at Rs 999.

Punjab and Sind Bank: Buy | LTP: Rs 29.85 | Stop-Loss: Rs 21 | Target: Rs 34 percent

Since the beginning, this counter has corrected almost 92 percent. At the current juncture, this stock is stabilized between Rs 15-25 which is proving to be its historical support.

For the last two trading sessions, buying interest was seen on the counter along with massive volume.

On the indicator front, the monthly MACD is displaying a bullish divergence along with a bullish crossover near the zero line hinting at more upside. The monthly DMI has made a bullish indication thus there is a possibility for further upside.

One can start accumulating this counter between Rs 25-28. The upside is expected till Rs 40 in the coming months, with support at Rs 21.

Expert: Vidnyan Sawant, AVP – Technical Research at GEPL Capital

State Bank of India: Buy | LTP: Rs 609 | Stop-Loss: Rs 565 | Target: Rs 725 | Return: 19 percent

By looking at the broader picture of SBI, we can observe that the stock is trading at life high levels which tells that the stock already is in strong momentum.

We witnessed upward slopping channel pattern breakout few weeks back on the weekly charts of the stock.

In the prior trading session the stock has given a consolidation breakout on the daily charts indicating continuation of prior uptrend.

Prices have sustained well above 13-week EMA (exponential moving average) which have acted as a strong variable support to the prices.

The momentum indicator like RSI (relative strength index) on the weekly timeframe has been moving upward since last few weeks and sustaining above 65 levels which shows strong positive momentum.

We recommend investors and trader to buy this stock for the target of Rs 725, where the stop-loss must be Rs 565 on the closing basis.

Axis Bank: Buy | LTP: Rs 905 | Stop-Loss: Rs 840 | Target: Rs 990 | Return: 9 percent

Axis Bank has been sustaining at life time high levels since last 3 months indicating strong bullish undertone of the stock for the medium term.

On the weekly charts, the stock has formed CIP (change in polarity) formation at Rs 840 levels and bounced back which shows bulls have strong grip over the counter.

On the daily time frame, the stock has given a horizontal channel pattern breakout at Rs 830 – 840 zone.

The breakout is confirmed as it is accompanied by huge volumes.

The stock is sustaining above 13-day EMA which confirms the short term strength of the stock is still exists.

RSI on the weekly timeframe is sustaining above 60 levels which shows that the prices have strong momentum in it.

We recommend traders and investors to buy this stock for the target of Rs 990 where the stop-loss must be Rs 840 on the closing basis.

Federal Bank: Buy | LTP: Rs 134.8 | Stop-Loss: Rs 115 | Target: Rs 175 | Return: 30 percent

Federal Bank has maintained its higher high, higher low formation at life time high levels which points towards the strong positive undertone of the stock.

The stock has formed CIP (Change in Polarity) formation at Rs 130 levels and made multiple touch points at the same level.

The current uptrend is followed by rise in the volumes which shows the long built up behind the prices.

RSI on the weekly timeframe maintained higher top higher bottom pattern which reflects the rising momentum in the prices.

We recommend traders and investors to buy this stock for the target of Rs 175 where the stop-loss must be Rs 115, the closing basis.

Expert: Rupak De, Senior Technical analyst at LKP Securities

Indiabulls Housing Finance: Buy | LTP: Rs 147.55 | Stop-Loss: Rs 140 | Target: Rs 158 | Return: 7 percent

The stock has given a pennant pattern breakout on the daily chart, suggesting a rise in optimism. The daily RSI is a bullish crossover.

The 50-EMA is well below its current price, confirming the bullish trend. Over the short term, the stock is likely to move up towards Rs 158 as long as it sustains above Rs 140.

DLF: Buy | LTP: Rs 414.4 | Stop-Loss: Rs 399 | Target: Rs 440 | Return: 6 percent

The stock has been consolidating after a swing high breakout on the daily chart. Besides, the price has remained above the important moving average. The daily RSI is in a bullish crossover.

Over the short term, the stock is likely to move up towards Rs 440 as long as it sustains above Rs 400.

Indian Bank: Buy | LTP: Rs 293 | Stop-Loss: Rs 279 | Target: Rs 310 | Return: 6 percent

The stock has remained above the previous consolidation on the daily chart, suggesting an ongoing bullish trend. Besides, the crucial moving averages are sitting well below the current price.

The momentum indicator is in a bullish crossover. A buy-on-dips strategy can be applied to the stock with an upside potential of Rs 310. The trend may reverse below Rs 280.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.