The case for a cut in rates has also been bolstered by a fall in consumer price inflation for November that came in at 2.33 per cent as compared to 3.38 per cent in October, led by a decline in food prices.
“We expect the RBI MPC to roll back at least 25 basis point (bp) of the 50bp rate hike in February or April. Growth is set to slow with tight liquidity aggravating base effects. Second, the RBI MPC's inflation risks are expectedly proving overdone,” says Indranil Sen Gupta, India economist at Bank of America Merrill Lynch (BofAML).
These developments, analysts say, though augur well for rate sensitive stocks like banks and auto, investors need to be selective and should buy these stocks from a medium-to-long term perspective.
“The new RBI governor is likely to make some changes to the existing policies, which bodes well for banks, especially the ones under PCA. Bank of Baroda, Vijaya Bank and Indian Bank are the three stocks that I like,” says G Chokkalingam, founder and managing director at Equinomics Research.
As regards autos, government's rural / farm push ahead of the general elections scheduled for 2019 augur well for the sector, especially the tractor and agri-related sub-segments, analysts say. However, a rise in crude oil and commodity prices, especially petrol and diesel continue to remain key concerns for the auto industry.
Analysts at CARE Ratings peg the sales growth in the tractor segment at 15 – 17 per cent in financial year 2018 – 19 (FY19); commercial vehicles at 25 – 30 per cent, passenger vehicles at 8 – 10 per cent and two-and-three wheelers at 17 – 19 per cent.
Saksham Kaushal, an analyst tracking the sector at Prabhudas Lilladher expects higher input costs to continue hurting the sector, albeit only in the near term.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.