RBI Monetary Policy | Bet on these 12 rate-sensitive stocks for 10-22% likely returns

Federal Bank, ICICI Pru Life Insurance, Oberoi Realty among the stocks. With the Sensex and the Nifty reversing losses after the RBI decision, experts say the Nifty’s next stop could be 17,800. Banking and financial services, FMCG, IT, metal and pharma stocks supported the market.

August 06, 2022 / 06:41 AM IST
 
 
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The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has raised the repo rate by 50 bps more to 5.4 percent, pushing it beyond the pre-Covid levels, to check the rising inflation, while keeping growth and inflation forecast unchanged for FY23.

The MPC also decided to remain focused “on withdrawal of accommodation to ensure that inflation remains within the target, going forward, while supporting growth”. This indicated that the rate hike is likely to continue in the coming policy meetings, experts said.

"The RBI’s 50 bps hike was largely in line with market expectations. Very importantly, with the RBI retaining the policy stance of “withdrawal of accommodation”, the implicit message is that rates are yet to reach neutral territory, and that more rate hikes are warranted – a view that we agree with," Aurodeep Nandi, India Economist and Vice President, Nomura, said.

The RBI continues to signal that all options are on the table, which is a prudent strategy, given the elevated levels of uncertainties on both growth as well as inflation, Nandi said.

Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, thinks that given the increasing external sector imbalances and global uncertainties, the need for frontloaded action was imperative. "We continue to see a 5.75 percent repo rate by December 2022.”

Also read:
RBI hikes repo rate by another 50 bps, so what's next?
Key takeaways from the RBI Governor's address

Market shrugs off central bank hike as rate-sensitive stocks continue to climb

The market reversed its losses after the RBI move. The BSE Sensex rallied 260 points to 58,559 and the Nifty50 rose 66 points to 17,448, at the time of writing this article. The index is near its resistance point of 17,450 levels, and experts said if the index gives a good closing above the same and holds, 17,800 can't be ruled out in the coming sessions. Banking and financial services, FMCG, IT, metal and pharma stocks supported the market.

Follow LIVE updates of the RBI MPC monetary policy announcement here

We have collated a list of rate-sensitive stocks that experts say can return between 10-22 percent over the next 3-6 months. Returns are calculated based on the closing price of August 4.

Expert: Ajit Mishra, VP, Research, Religare Broking

Eicher Motors: Buy | LTP: Rs 3,145.80 | Stop-Loss: Rs 2,850 | Target: Rs 3,500 | Return: 11 percent

We have been seeing a noticeable traction within the auto space for five months, and Eicher Motors is trading in sync with the trend. It has witnessed a breakout, of late, after staying in the consolidation range of Rs 2,300-3,000 for a year and a half.

The chart pattern and prevailing buoyancy in the auto space indicate the prevailing trend to continue. We thus recommend accumulating the stock within the Rs 3,000-3,100 zone.

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Federal Bank: Buy | LTP: Rs 107.95 | Stop-Loss: Rs 98 | Target: Rs 126 | Return: 17 percent

Banking and financial stocks have contributed significantly to the recent market surge and indications are that the current trend will continue after a minor pause.

In line with this view, Federal Bank has paused after the breakout from a consolidation range, offering a fresh buying opportunity. We advise creating fresh longs within the Rs 104-108 level.

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Shriram Transport Finance Corporation: Buy | LTP: Rs 1,359.90 | Stop-Loss: Rs 1,250 | Target: Rs 1,550 | Return: 14 percent

Within the NBFC space, Shriram Transport Finance has been among the top performers, after the breakout from a triangle pattern. It has retraced marginally, of late, and reached closer to the support zone of the short-term moving averages zone.

We might see some consolidation around the current levels, before the stock resumes the trend. We advise utilising this phase to accumulate the stock within the Rs 1,300-1,350 levels.

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Expert: Vinay Rajani, CMT, Senior Technical & Derivative Analyst at HDFC Securities

Muthoot Finance: Buy | LTP: Rs 1,101.3 | Stop-Loss: Rs 1,060 | Targets: Rs 1,165-1,210 | Return: 6-10 percent

The stock has started forming a higher top and higher bottom formation on the daily chart. The stock found support on the long-term upward sloping trend line on the monthly chart and reversed north.

It has recently crossed the 50-day EMA (exponential moving average) resistance. One can buy the stock in the Rs 1,101-1,075 range.

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Brigade Enterprises: Buy | LTP: Rs 515.35 | Stop-Loss: Rs 490 | Targets: Rs 550-580 | Return: 7-12 percent

The stock is on the verge of hitting an all-time high above Rs 553. It is above all the important moving averages, which indicate a bullish trend on all time frames.

Indicators and oscillators have turned bullish on the weekly chart. One can buy the stock in Rs 515-500 range.

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ICICI Prudential Life Insurance: Buy | LTP: Rs 560.15 | Stop-Loss: Rs 530 | Targets: Rs 605-640 | Return: 8-14 percent

The stock price has broken out from a downward sloping trend line resistance on the weekly chart. Price breakout is accompanied by rising volumes.

The stock is on the verge of crossing the crucial double top resistance placed at Rs 564. It has been forming a higher top and higher bottom formation on the weekly chart. One can buy the stock in the Rs 560-640 range.

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Expert: Jigar S Patel, Senior Manager - Equity Research at Anand Rathi Shares & Stock Brokers

Phoenix Mills: Buy | LTP: Rs 1,281 | Stop-Loss: Rs 1,200 | Target: Rs 1,480 | Return: 15 percent

Phoenix Mills is making higher highs and higher lows. It has been in a clear uptrend since the last 6-7 months, and it is expected to continue its uptrend.

At present, it has formed an N wave and it is expected to touch Rs 1,480 by the end of 2022. On the indicator front, the daily RSI (relative strength index) is rebounding from the 50 levels, along with the daily MACD (moving average convergence and divergence) making a bullish cross above the zero line. This gives a further upside.

One can buy, add and hold the stock for a target of Rs 1,480, with a stop-loss of Rs 1,200.

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IndusInd Bank: Sell | LTP: Rs 1,050.20 | Stop-Loss: Rs 1,100 | Target: Rs 950 | Return: 9.5 percent

IndusInd Bank on the daily chart is at the resistance levels of Rs 1,050-1,070. Also, it has made a Bearish Harami candlestick pattern near this resistance.

On the indicator front, the daily MACD is over-stretched, hinting at a loss of momentum. One can sell this near the resistance levels, with a target of Rs 950 and stop-loss of Rs 1,100.

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Mahindra & Mahindra Financial Services: Buy | LTP: Rs 194.85 | Stop-Loss: Rs 180 | Target: Rs 220 | Return: 13 percent

At the current juncture, the stock has taken support near the Rs 185 mark, which is also its previous top made on June 2022.

Moreover, the support is also a 50 percent retracement of the previous swing high, which started from the Rs 160 level.

Last but not the least, a Doji pattern is formed near the support zone. This indicates an upside in the near future. One can buy this with a target of Rs 220. The stop-loss would be Rs 180.

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Expert: Rupak De, Senior Technical Analyst at LKP Securities

AU Small Finance Bank: Buy | LTP: Rs 636.6 | Stop-Loss: Rs 569 | Target: Rs 776 | Return: 22 percent

The stock has given an inverted head and shoulder pattern breakout on the daily chart. The price has moved above the 50-day EMA on the daily chart.

The RSI is in a bullish crossover. The trend is likely to remain positive over the medium term.

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Tata Motors: Buy | LTP: Rs 468.9 | Stop-Loss: Rs 438 | Target: Rs 530 | Return: 13 percent

The stock has moved above its previous swing high on the daily chart, suggesting a rise in optimism. Besides, the price has sustained above its 50-day EMA on the daily chart.

On the weekly chart, the stock has given a consolidation breakout. The trend is likely to remain positive over the medium term.

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Oberoi Realty: Buy | LTP: Rs 896.5 | Stop-Loss: Rs 820 | Target: Rs 1,060 | Return: 18 percent

The stock has been correcting after a decent rally from the Rs 720 levels. However, the stock is in an uptrend for the medium term.

Besides, the stock has moved above its 200-day moving average, which suggests long- term bullishness. The trend is likely to remain positive over the medium term.

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Disclaimer: The views and investment tips by 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 making any investment decisions.
Sunil Shankar Matkar
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