RBI Monetary Policy | Governor Shaktikanta Das said continued policy support is warranted for a durable and broad-based recovery and efforts will be made to limit disruptions to economic activity
Sunil Shankar Matkar
February 10, 2022 / 01:29 PM IST
Reserve Bank of India (RBI)
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The Reserve Bank of India’s Monetary Policy Committee unanimously decided on February 10 to keep the repo and reverse repo rates unchanged and continue with its accommodative stance and vote for growth, expecting inflation to peak in the current quarter.
The dovish move was against the expectations of most experts who had predicted an increase in the reverse repo rate, in tandem with hawkish global central banks amid rising prices, including that of crude oil.
RBI governor Shaktikanta Das said continued policy support is warranted for a durable and broad-based recovery and efforts will be made to limit disruption to economic activity. The repo rate at 4 percent and the reverse repo rate at 3.35 percent were unchanged.
Inflation as measured by the Consumer Price Index edged higher to 5.56 percent in December from 4.84 percent in the previous month and 3.67 percent in December 2020, but is along expected lines, the governor said.
Core inflation remains elevated but headline inflation will peak in the current quarter and moderate in the first half of FY23, he added.
The central bank maintained its CPI inflation forecast of 5.3 percent for FY22 and expects FY23 CPI inflation at 4.5 percent.
Also read – Rate-sensitive stocks in focus as RBI keeps key interest rates unchanged; banks, realty rise, auto under pressure
The stock markets reacted positively, with the BSE Sensex rising 386 points to 58,852 and the Nifty 50 climbing 113 points to 17,577 at 11:20 hours IST, continuing an uptrend for the third consecutive session. The Nifty bank, financial services, realty and metal indices gained more than 1 percent each.
“Even though this might invite criticism of the central bank being behind the curve, the RBI governor has categorically communicated that ‘continued policy support is warranted for a durable and broad-based recovery.’ This clear pro-growth stance is desirable at the current juncture,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
Also read – RBI Monetary Policy: Key takeaways from the MPC meeting
He said the market responded positively to the policy for now, with banking stocks exhibiting strength. However, the short- to medium-term trend of the market may be influenced by US inflation data expected later on February 10.
According to Mihir Vora, senior director and chief investment officer at Max Life Insurance, the policy stance and the governor’s commentary are dovish.
“The RBI has chosen to support the fledgling growth recovery and not pre-emptively panic on inflation trends. The central bank chose not to disturb market sentiments by keeping key policy rates and an ‘accommodative’ stance unchanged,” Vora said.
Also read – Explained | Shaktikanta Das presents a non-event policy for markets, plays waiting game
He said April will be the appropriate window for action on the reverse repo rate.
Follow LIVE updates of the RBI MPC monetary policy announcement here
Here is a list of rate-sensitive stocks that experts say can return between 4 and 15 percent over the next 3-4 weeks. Returns are calculated based on February 9 closing prices.
Expert: Rajesh Palviya, vice president – research at Axis Securities
Maruti Suzuki: Buy | LTP: Rs 8,949.45 | Stop-Loss: Rs 8,400 | Target: Rs 9,150-9,300 | Return: 4 percent
The stock is in a strong uptrend across all time frames as it is forming a series of higher tops and bottoms. On the weekly chart, the stock has decisively broken out of a one-year “rounding bottom” formation on a closing basis, indicating further strength.
Huge rising volumes on the rally reconfirm increased participation. The daily, weekly and monthly Bollinger Bands signal increased momentum in the stock. The daily, weekly and monthly relative strength index (RSI) remain bullish along with a positive crossover, which supports the upside momentum.
Also read – RBI Monetary Policy: Continued policy support warranted for durable growth
Investors should buy, hold and accumulate this stock with an expected upside of Rs 9,150-9,300 and a downside support zone of Rs 8,400-8,300.
HDFC: Buy | LTP: Rs 2,435.35 | Stop-Loss: Rs 2,370 | Target: Rs 2,600-2,750 | Return: 13 percent
With the current close, the stock has renounced its one-year “multiple support” zone of Rs 2,400-2,370, which remains a crucial level. A huge volume spurt near such a major support zone signifies strong buying at lower levels.
For the past couple of months, the positive divergence on the RSI indicates rising strength at lower levels. However, any weekly close below the major support zone of Rs 2,400-2,370 may cause further weakness.
Investors should buy, hold and accumulate this stock with an expected bounce-back rally towards Rs 2,600-2,750 and a downside support zone of Rs 2,370-2,350.
IndusInd Bank: Buy | LTP: Rs 967.15 | Stop-Loss: Rs 900 | Target: Rs 1,060-1,110 | Return: 15 percent
Since November 2020, the stock has been consolidating near its “multiple support zone” of Rs 830-800. However, with the buying momentum over the past couple of weeks, the stock rebounded sharply, indicating a strong comeback of bulls.
On the daily chart, the stock has confirmed a “double bottom” formation, indicating a trend reversal to the upside. The daily and weekly RSI remain bullish along with a positive crossover, which supports the upside momentum.
Investors should buy, hold and accumulate this stock with an expected bounce-back rally towards Rs 1,060-1,110 and a downside support zone of Rs 900-860.
Expert: Vinay Rajani, Senior Technical & Derivative Analyst at HDFC Securities
SBI: Buy | LTP: Rs 535.25 | Stop-Loss: Rs 518 | Target: Rs 570 | Return: 6.5 percent
The stock has been consolidating for the past seven trading sessions. The primary trend of the stock has been bullish, with higher tops and higher bottoms. The stock is placed above all important moving averages, which indicates a bullish trend on all time frames.
The PSU Bank Index has been outperforming for the past couple of weeks and this is expected to continue. Indicators and oscillators show strength in the current uptrend.
Maruti Suzuki: Buy | LTP: Rs 8,949.45 | Stop-Loss: Rs 8,622 | Target: Rs 9,500 | Return: 6 percent
The stock has broken out from the “Flag” pattern on the daily charts. The price breakout was accompanied by a jump in volumes. Maruti has been one of the best-performing auto stocks in the recent past.
The stock has surpassed the multiple top resistance level at about Rs 7,600. Indicators and oscillators have turned bullish on the daily and weekly charts. The stock price has been forming higher tops and higher bottoms on the daily chart.
LIC Housing Finance: Buy | LTP: Rs 391.85 | Stop-Loss: Rs 375 | Target: Rs 415 | Return: 6 percent
The stock price is in a “Flag” pattern formation on the daily chart. It has been finding support at the 50-day exponential moving average. The stock has broken out from a falling wedge on the weekly line chart.
In January, the stock formed a bullish “Hammer” candlestick pattern on the monthly chart. The primary trend of the stock has been bullish, with higher tops and higher bottoms.
Expert: Ruchit Jain, Lead – Research at 5paisa.com
Eicher Motors: Buy | LTP: Rs 2,625.65 | Stop-Loss: Rs 2,560 | Target: Rs 2,720-2,755 | Return: 5 percent
The auto space has attracted decent buying interest in the recent past and stocks in this sector have traded on higher volumes. For the past one year, Eicher Motors has been consolidating within a broad range, which seems to be a time-wise corrective phase within its longer-term uptrend.
On the daily chart, the stock is trading at about the 61.8 percent retracement support of the previous up-move and it is also around its 200-day EMA support. The RSI oscillator has taken support about 40 and is witnessing a positive turnaround.
With the sector gaining momentum, the risk-reward is quite favourable to take a contra trade in this stock, which could again resume the up-move here on.
Traders can look to trade with a positive bias and buy in the range of Rs 2,625-2,620 for potential targets of Rs 2,720 and Rs 2,755 in the near term. They can place a stop-loss below Rs 2,560 on long positions.
Can Fin Homes: Buy | LTP: Rs 628.85 | Stop-Loss: Rs 605 | Target: Rs 651-668 | Return: 6 percent
After a corrective phase, prices have started forming a ‘higher top higher bottom’ structure, which indicates a resumption of the uptrend. Recent price gains were supported by higher-than-daily average volumes, while the correction in the past few sessions was on lower volumes.
The stock is trading around its support level and seems to be in a good buying zone for short-term traders.
Traders can look to trade with a positive bias and buy in the range of Rs 628-624 for potential targets of Rs 651 and Rs 668 in the near term. One can place a stop-loss below Rs 605 on long positions.
Cholamandalam Investment: Buy | LTP: Rs 682.95 | Stop-Loss: Rs 644 | Target: Rs 748 | Return: 9.5 percent
This stock has seen a decent outperformance in the past few weeks. Even amid a corrective phase in the broader market, this stock managed to rally higher and is trading around its all-time high.
Following the up-move, there was some time-wise correction in the later part of January and the stock now seems to have resumed its uptrend. Volumes during the recent rise were good and the readings indicate a positive momentum.
Traders can look to trade with a positive bias and buy in the range of Rs 682-675 for a potential target of Rs 748 in the short term. One can place a stop-loss below Rs 644 on long positions.
Expert: Parth Nyati, Founder of Tradingo
IRB Infrastructure Developers: Buy | LTP: Rs 299.75 | Stop-Loss: Rs 270 | Target: Rs 345 | Return: 15 percent
The counter is in a strong, bullish momentum after a minor consolidation. On the hourly chart, there is a breakout of a bullish flag formation that may take it towards the immediate target of Rs 345, while on the downside, Rs 275 level will act as a strong support level.
Momentum indicators are positively poised. However, some of them are in oversold territory and may remain oversold for some more time.
Federal Bank: Buy | LTP: Rs 102.15 | Stop-Loss: Rs 97 | Target: Rs 113 | Return: 11 percent
The counter has relative strength where it took support at the 20-DMA during the recent pullback and is now witnessing a breakout of the ascending triangle formation that may take this counter towards Rs 110-113 while the 20-DMA of Rs 99 will act as an immediate support level.
The RSI witnessed a positive crossover after taking support at the 50 mark, where the MACD (moving average convergence/divergence) is trading above the centreline.
Disclaimer: The views and investment tips expressed by investment 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.
