Another RBI rate cut on the cards; rate-sensitive stocks gain ahead of MPC decision

NEW DELHI: Majority of interest-rate-sensitive counters from auto, banking and realty sectors were trading in the green in Friday's session ahead of the Reserve Bank of India’s monetary policy decision.

The BSE Auto index was trading 0.29 per cent higher at 16,804 at around 9.20 am with Hero MotoCorp gaining the most at 1 per cent. It was followed by Maruti Suzuki (up 0.81 per cent), TVS Motor (0.91 per cent) and Eicher Motors (0.65 per cent).

Tata Motors, Mahindra and Mahindra and Ashok Leyland were down between 0.25 per cent and 1 per cent.

The BSE Bankex index was up 0.93 per cent at around the same time. YES Bank, RBL Bank, IndusInd Bank and State Bank of India were up 7 per cent, 2.55 per cent, 2.26 per cent and 1.53 per cent. HDFC Bank, Axis Bank, Kotak Mahindra Bank and ICICI Bank was trading higher between 0.30 per cent and 1 per cent.

YES Bank extended its gain to the second straight session after the lender said its financials are strong and liquidity is well in excess of regulatory requirements.

On the other hand, the benchmark BSE Sensex was up 0.69 per cent, or 264 points, at 38,370.

Real estate majors also advanced up to 2 per cent in the early trade. The BSE Realty index was trading 0.57 per cent up at 1934. Godrej Properties, Oberoi Realty, DLF, Indiabulls Real Estate and Prestige were up over 0.40 per cent. On the other hand, Sobha and Sunteck were down up to 2 per cent.

Bank of America Merrill Lynch (BofAML) expects the RBI MPC to follow RBI Governor Shaktikanta Das into another ‘out-of-the-box’ 35 basis points repo rate cut on October 4. This should send a strong signal for bank lending rate cuts with the ‘busy’ industrial season round the corner. “With the 2018 liquidity crunch still hurting growth, our India Activity Indicator points to continued slowdown,” said BofAML.

There are expectations that RBI may deliver a fifth straight interest rate cut, although economists are unsure of the quantum following an unconventional 35 basis-point easing last time.

While all 33 economists surveyed by Bloomberg News expect a reduction, their forecasts range from 20 basis points to 40 basis points. The RBI has lowered borrowing costs to a nine-year low of 5.4 per cent through 110 basis points of easing so far in 2019.