RESERCH REPORT ON STOCKS AFFECTED BY CHANGE IN REPO RATES
What is Repo rate?
Repo rate is the interest charged by the RBI when commercial banks borrow from them by selling their securities to the central bank. Essentially it is the interest charged by the RBI when banks borrow from them – much like commercial banks charge you interest for a car loan or home loan.
Repo rate’s relation with the stock market
• The stock market and the interest rates have an inverse relationship. Every time the central bank increases the repo rate, its immediate impact is seen on the stock markets.
• This means that following the hike in the repo rate prompts companies to also cut back on the spending on the expansion, which leads to a dip in growth and affects the profit and future cash flows, resulting in a fall in stock prices.
• If several companies follow this suit, it eventually leads to a fall in markets.
• In a nutshell, an increase in interest rates means an increase in savings and a reduction in the flow of capital to the economy, which results in slump in stock markets.
• Further, the impact of the change in repo rate down does not have the same effect on all sectors. For example, the capital-intensive sectors such as capital goods, infrastructure, etc, are more vulnerable to these changes due to high capital or debt on the books of these companies. While stocks of sectors like Information Technology (IT) or Fast-moving consumer goods (FMCG) usually see a lesser impact.
Bajaj Finserv Limited
Bajaj Finserv was founded in 2007 and is a unit of Bajaj Holdings and Investments. It offers loans to doctors for career enhancement, home loans, gold loans, individual loans, business, and entrepreneur loans, and is an extremely popular finance company. Apart from these, Bajaj Finserv also provides services like wealth advisory, lending money, and general insurance. It has over 1400 branches across the country with more than 20000 employees.
• Buy Bajaj Finserv Ltd. at 1675 Target 1810,1900 Stop loss 1570
Muthoot Finance Ltd
Muthoot Finance Ltd is India’s first NBFC tracing its history back to 1888 when it began as a small lender from a village in Kerala. Muthoot Finance Ltd sanctions loans only against pledge of gold ornaments. It is a leader in India’s gold loan and finance market. Besides financing gold transactions, Muthoot Finance Ltd offers foreign exchange services, money transfers, wealth management services, travel, and tourism services. Gold coins are also sold at Muthoot Finance Branches. The company has its headquarters in Kerala, India, and operates over 4,400 branches throughout the country. It is also the parent company of Muthoot Housing Finance (India) Ltd, which offers home loans.
• Buy Muthoot Finance at 1000, Target 1060,1120, Stop loss 950
State Bank of India
The State Bank of India, the countrys oldest bank and a premier in terms of balance sheet size, number of branches, market capitalization and profits is today going through a momentous phase of change and transformation the two hundred year old public sector behemoth is today stirring out of its public sector legacy and moving with an agility to give the private and foreign banks a run for their money.The bank is entering into many new businesses with strategic tie ups Pension Funds, General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition, Advisory Services, structured products etc each one of these initiatives having a huge potential for growth.The services offered by the company includes NRI Services,Personal Banking,International Banking,Agriculture / Rural,Corporate Banking,SME,Government Business and Domestic Treasury.
• Buy SBIN at 525 Target 570,610 Stop loss 490
Bank of Baroda
Bank of Baroda is a pioneer in various customer centric initiatives in the Indian banking sector. Services offered by the bank includes Retail banking -under which it offers products and services such as deposits, loans, credit and debit cards, demat services, remittances, ECS (electronic clearing services, government business, etc.; Rural and agri banking under which it offers products and services such as deposits, agricultural loans, lockers services, etc to rural customers and agricultural sector; Corporate banking -under which it provides project finance, film finance, foreign currency loans, working capital finance, treasury products, etc to the corporate sector; products & services are also offered for the SME sector & provides wealth management services to companies in the areas of insurance and mutual funds. In insurance it offers services to HDFC and National Insurance Company. In mutual funds it provides services to UTI, Birla Sun Life, Reliance Mutual Fund, Sundaram BNP Paribas, Franklin Templeton Investments and Baroda Pioneer Asset Management Company.
• Buy Bank of Baroda at 130, Target 148,163 Stop loss 114
Axis Bank Ltd.
Axis Bank Ltd. has been promoted by the largest and the best Financial Institution of the country, UTI. The Bank has strengths in both retail and corporate banking and is committed to adopting the best industry practices internationally in order to achieve excellence. Services offered by the bank include Personal Banking, Corporate Banking, NRI Banking, Priority Banking, VBV – Online purchases using Credit Card and VBV / MSC – Online purchases using Debit Card
• Buy Axis bank at 800 Target 910,945 Stop loss 707
ICICI Bank Limited
ICICI Bank Limited is an Indian private development finance institution. It is headquartered at Mumbai. It offers a wide range of banking products and financial services for corporate and retail customers through a variety of delivery channels and specialized subsidiaries in the areas of investment banking, life, non-life insurance, venture capital and asset management.
This development finance institution has a network of 5,275 branches and 15,589 ATMs across India and has a presence in 17 countries. The bank has subsidiaries in the United Kingdom and Canada; branches in United States, Singapore, Bahrain, Hong Kong, Qatar, Oman, Dubai International Finance Centre, China and South Africa; as well as representative offices in United Arab Emirates, Bangladesh, Malaysia and Indonesia. The company’s UK subsidiary has also established branches in Belgium and Germany.
• Buy ICICI bank at 870 Target 940,975 Stop loss 806