Repo growth fails to dampen attractiveness for rate sensitive stocks

MUMBAI: The Reserve Bank’s second consecutive month of hike in interest rates has not quelled investor appetite for stocks of interest rate-sensitive companies such as banks, real estate and automobiles.

but, Analysts warn that forward rate increases This could result in fewer stocks remaining attractive as investors assess the impact of higher interest rates on demand.

Analysts are positive on residential developers in the real estate and auto sectors, but less optimistic about lenders. Mahindra & Mahindra,

and are seen as more attractive bets at the moment.



Sanjeev Prasad, co-head, Kotak Institutional Equities, said, “The way forward for rate sensing will depend on the extent of rate hikes. I think we will see another 60-85 bps (growth) based on our inflation forecasts. ” “I don’t think a rate hike of 150-175 bps will destroy huge demand. However, if reserve Bank of India We would face challenges to demand if inflation-linked rates were to increase further than expected,” Prasad said.

The BSE Realty index on Thursday closed 0.28% higher at 3,227.36 and the Auto index rose 0.27% at 26,015.04, a day after RBI hiked key policy rate by 50 basis points. In May, the central bank had increased the rate by 40 basis points.

Hemang Jani, head of equity strategy-broking and distribution, said the RBI rate hike was an event risk, which has been factored in, so the rate hike is not a downside development for the rate. sensitive stock, Realty index is down 12% from April but auto index is up 8% from April. Bank Nifty closed 0.4% higher at 35,085.45.

Siddharth Bhamre, Head of Research

Securities consider auto and real estate stocks to be more attractive propositions than banks.

“After the 50-bps hike, we have not seen a major decline in auto or banking names. Within rate sensitive, auto sector is well poised, with technical chart breakout from index 5-6% off all-time high And a bullish situation has formed,” Bhamre said.

“The correlation of falling rate sensitive to rate hike doesn’t work every time,” he said. Bhamre does not give much preference to banks as this increase in interest rate is not due to growth but due to supply side factors.