Rate sensitive sectors are back in focus after the Reserve Bank of India (RBI) surprised market analysts on Tuesday and cut repo rate by 50 basis points to 6.75 per cent from 7.25 earlier. (Photo: PTI)

Rate sensitive sectors are back in focus after the Reserve Bank of India (RBI) surprised market analysts on Tuesday and cut repo rate by 50 basis points to 6.75 per cent from 7.25 earlier. Post the announcement, rate sensitive realty, auto, bankex and infrastructure stocks moved in green.

The BSE Realty, BSE Bankex, BSE Auto were trading 0.83 per cent, 0.55 per cent and 0.18 per cent up at 1,352.98, 19,701.01 and 17,045.96 in the afternoon trade (at 12.25 pm). Sensex was up 0.26 per cent at 25,683.14.

However, the 30-share index was down around 1 per cent at 25,373 at 10 am. BSE Bankex, BSE Auto and BSE Realty were down 1.76 per cent, 1.71 per cent and 1.18 per cent, respectively, at the same time.

Jimeet Modi, chief executive officer, SAMCO Securities said, “We believe today’s policy action will significantly drive faster transmission to the end borrower, it will drive urban consumption and will drive growth in the rate sensitive sectors. We believe sectors such as housing finance, consumer lending, private banks will do well over the next few quarters. It might still take a while for the investment cycle to pick up since that is also a function of government reforms.”

Murthy Nagarajan, head, fixed income, Quantum AMC, said, “Few in the market expected a 50 basis points cut in today’s policy. And it doesn’t end there, the RBIs inflation forecast of 4.75 per cent for Jan-Mar 2017 quarter suggests further room for rate cuts in CY 2016.”

Here are five rate sensitive stocks on which market experts are bullish on

Mahindra and Mahindra
Recommended By: Sharekhan
Why Buy: Considering the below-par monsoon for a second year in a row, Sharekhan expects the weakness in the tractor segment to persist in FY2016. Although a sharp decline in the second half of 2015-16 is not expected given the low base of last year, a meaningful recovery in the segment would be delayed to FY2017. Hence, the brokerage house has cut its tractor segment growth estimates for FY2016.

In a research note, Sharekhan said, “Consequently, our earnings estimates for FY2016 and FY2017 have been lowered by 6 per cent and 3 per cent, respectively. However, given the expectation of a pick-up in the UV volumes (on the back of new launches) and a recovery in the tractor industry in FY2017, we have maintained our Buy recommendation on the Mahindra & Mahindra stock with an SOTP-based revised price target of Rs1,450 (vs Rs 1,550 earlier).”

Axis Bank
Recommended By: Angel Broking
Why Buy: Axis Bank’s healthy branch expansion has not only helped it maintain low cost deposits (CASA at a healthy 43%), but also improve its mix of profitable retail loans to total loan book from 20 per cent to 40 per cent. Focusing on secured retail products has aided bank to maintain relatively better asset quality with Net NPA ratio at 0.48 per cent in 1QFY2016. It is well capitalized with Tier I capital adequacy at 12 per cent positioning it strongly for growth and market share gains as GDP growth revives. On valuation front, bank is trading at 2.0x FY2017 P/ABV.

Larsen & Toubro (L&T)
Recommended By: Angel Broking
Why Buy: L&T’s strong bid pipeline, robust order book, coupled with comfortable deb-to-equity ratio suggest that the company will be able to attain its FY2016 order inflow and top-line guidance. Using SoTP valuation methodology, the brokerage house arrive at FY2017E price target of Rs 2,013. L&T is a proxy play for investors wanting to ride on the Indian infrastructure growth story.

Ashok Leyland
Recommended By: Angel Broking
Why Buy: Ashok Leyland would be direct beneficiary of medium and heavy commercial vehicles (MHCV) upcycle from which it derives about 90 per cent of revenues. MHCV would be the fastest growing automotive segment over the next two years (Angel Broking expects 17 per cent CAGR volume growth over FY2015-2017), as the industry is likely to reach pre downcycle levels by FY2018. Strong volume growth coupled with operating leverage and reduced discounts is likely to increase profitability by 5 times for Ashok Leyland over the next two years.

State Bank of India
Recommended By: ICICI Direct
Why Buy: Among PSU banks, the brokerage house continue to stick to the largest bank as it is a proxy to the economy in the long term. Post capital infusion, its tier 1 ratio was at 9.6 per cent as on Q1FY16. In a research report ICICI Direct said, “We factor in credit growth in line with industry and plans to raise capital via QIP this year. Asset quality has now shown signs
of increased pressure with stressed assets ratio (NNPA+ Std RA) at 6.5 per cent. We review our estimates and valuation and revise both lower to arrive at a target price of Rs 300 valuing the core book at 1.4x FY17E ABV and add Rs 44 for associate banks & subsidiaries (life and general insurance, AMC,etc) against Rs 374 earlier. We maintain ‘BUY’ for long term.”

(Disclaimer: The stocks are recommended by the respective brokerage houses and not a recommendation from Financial Express online)

State lender Corporation Bank today approved issuance of over 15.66 crore shares on preferential basis to government valued at about Rs 857 crore. (Express Photo)

State lender Corporation Bank today approved issuance of over 15.66 crore shares on preferential basis to government valued at about Rs 857 crore.

At the Extraordinary General Meeting (EGM) held in Mangaluru today, the bank also approved to issue over 2.8 crore equity shares to LIC worth over Rs 142.99 crore.

In a filing on BSE, Corporation Bank said the meeting of the shareholders resolved and approved “to issue 15,66,15,497 equity shares…at an issue price of Rs 54.72 per share, to the government i.e. the promoter.”

“…decision of government to infuse funds up to Rs 856,99,99,995.84 into the capital of the Bank, by way of issue and allotment of 15,66,15,497 equity shares of the bank…on preferential basis,” said the filing.

Corporation Bank also said it will issue 2,81,60,693 equity shares of the bank at an issue price (which is at premium) of Rs 50.78 per share to the Life Insurance Corporation of India (LIC), a shareholder.

In August, government had announced capital infusion of Rs 20,088 crore in 13 public sector banks, including in SBI, PNB, IDBI, Bank of Baroda, Canara Bank.

Shares of Corporation Bank today closed at Rs 44.15 apiece on BSE, down 0.11 per cent from previous close.

Stocks in focus today: Crompton Greaves has bagged a 17 million euro (Rs 125 crore) order from Spanish utility Gas Natural Fenosa (GNF) for supplying ZIV single and three phased smart meters.(Photo: PTI)

The BSE Sensex and NSE Nifty opened on a weak note on Tuesday after Asian shares fell to three-week lows on China worries. At 9.20 am, Sensex was down 263.99 points at 25,352.85. Similarly, Nifty was down 81.50 points at 7,714.20 during the same time.

Stocks that are likely to be in focus

Rate sensitive stocks will be in focus ahead of the Reserve Bank of India’s (RBI) monetary policy review, which is scheduled around at 11 am.

Crompton Greaves: The Avantha Group company Crompton Greaves has bagged a 17 million euro (Rs 125 crore) order from Spanish utility Gas Natural Fenosa (GNF) for supplying ZIV single and three phased smart meters.

Jaiprakash Power Ventures: The company on Monday said that it has paid $75 million to bondholders on sale of securities of its arm Himachal Baspa Power Company Limited (HBPCL) to JSW Energy.

Maruti Suzuki: After a wage hike for its permanent workers last week, Maruti Suzuki is now going to do the same for its temporary and contractual employees, Financial Express reports. Though some temporary workers at the company’s Manesar plant had staged a protest on Saturday after the wage revision for permanent workers demanding they too be given a hike, sources in the company said that a revision for the former is also in the works so the matter has been resolved.

Lanco Infratech: The company said it may sell power projects having capacity of 3,000 MW from 2018 onwards and expects to get Rs 25,000 crore, which would help pare debt and also infuse fresh capital into the group.

Larsen & Toubro (L&T): The engineering major said its arm L&T Construction has bagged orders worth Rs 1,509 crore so far this month.

The BSE Sensex and NSE Nifty opened in red on Tuesday tracking weak global cues. (Photo: PTI)

11.18 am: Home loans are set to become cheaper after the Reserve Bank of India on Tuesday in its monetary policy review announced to cut repo rate by 50 basis points to 6.75 per cent. Shares of SBI, IndusInd Bank and HDFC Bank were up 0.15 per cent, 0.62 per cent and 0.68 per cent.

11.11 am: Post rate cut interest sensitive banking and realty stocks turned green. The BSE Bankex and BSE Realty index were up 0.38 per cent and 0.93 per cent at 19,668 and 1,354. BSE Auto index was down 0.16 per cent at 16,989.

11.08 am: RBI Governor Raghuram Rajan surprised market analysts on Tuesday. A Reuters poll last week showed only one out of 51 economists had expected a 50 basis points rate cut, while 45 had expected a 25 bps cut. Sensex and Nifty were up 6 points and 10 points at 25,622 and 7,805.

11.02 am: Sensex was up 86.54 points at 25703.38. Shares of HDFC was up over 2 per cent at Rs 1,199.70.

11.00 am: RBI cuts repo rate by 50 basis points. Sensex wiped off some its losses and was down 133 points 25,483. Repo rate is now at 6.75 per cent.

10.54 am: All the major sectoral indices in the BSE were trading in the red as the BSE Midcap and Smallcap indices lost 1.3 per cent and 1.2 per cent, respectively. Sensex down over 300 points at 25,312. Nifty was down 94 points at 7,701.

10.27 am: Interest sensitive stocks are in focus ahead of the Reserve Bank of India (RBI) fourth bi-monthly monetary policy which is scheduled around 11 am on Tuesday. Most of markets are predicting that the RBI may go for a 25 basis points rate cut this time. In the early trade on Tuesday, the 30-share index was down around 1 per cent at 25,373 at 10 am. BSE Bankex, BSE Auto and BSE Realty were down 1.76 per cent, 1.71 per cent and 1.18 per cent, respectively. Nifty was down 85 points at 7,711.

10.02 am: The rupee fell sharply by 32 paise at 66.37 against the US dollar in early trade today at the Interbank Foreign Exchange due to month-end demand for the American currency from importers. Sensex was down 246 points at 25,370. Nifty was down 79 points at 7,716.

9.27 am: Sensex was down 286 points at 25330. Nifty was down 79 points at 7,716. Nitasha Shankar, vice president, research, YES Securities, said, “The global investors are back to being cautious with worries related to China and overall growth of the global economy. In such a scenario all eyes are turned towards the RBI. Expectations are for a rate cut in the policy meet scheduled to be held today. These expectations were visible in the run up seen in the rate sensitive sectors in the previous trading session.”

READ: 4 reasons why RBI may go for a rate cut today

9.16 am: Sensex was down over 300 points at 25,307.94. Nifty was down over 1 per cent at 7,712. Vedanta, ICICI Bank, Bharti Airtel, Axis Bank, Hindalco and Tata Steel declined over 2 per cent in the early trade.

Domestic equity markets opened lower on Tuesday tracking weak global cues. Sensex opened 120.46 points down at 25,496.38. Nifty opened 70 points down at 7,725.70.

Interest sensitive stocks are likely to be in focus ahead of the Reserve Bank of India’s (RBI) monetary policy review, which is scheduled around at 11 am. The RBI had kept its benchmark lending rate – the repo rate unchanged at 7.25 per cent in its monetary policy review on August 4.

How has the market reacted to the three previous RBI monetary policy decisions?

On Monday, Sensex closed 246.66 points down at 25,616.84 while Nifty closed 72.80 points down at 7,795.70. Vinod Nair, head, fundamental research, Geojit BNP Paribas Financial Services, said, “We are in a wait and watch scenario ahead the RBI policy meet on Tuesday. We believe that the market has already considered a rate cut of 25 basis points, hence the commentary will be more important. Given the volatility in the global currency and the likelihood of a US rate hike by Dec-15, the commentary is likely to be hawkish and may not be taken positively by the market.”

Global Markets
New York: US stocks finished sharply lower on Monday and were on track for their worst quarter in four years as investors worried about the health of China’s economy and its potential impact on the timing of a US interest rate increase.

London: Britain’s leading share index fell on Monday as fears grew over mining group Glencore’s ability to withstand a metals price slump and as Vodafone’s European tie-up talks with Liberty Global LBTYA.O ended.

Tokyo: Japan’s Nikkei share average tumbled more than 2 per cent to an 8-month low on Tuesday as fears about China’s cooling economy pummelled shares of commodity and machinery firms.

Hong Kong: The Hang Seng index was down 3.4 per cent.

(With inputs from agencies)