Which bank, NBFC stocks you should buy ahead of RBI policy? Find out!

Majority of experts are believing a 25 basis point rate cut as reality in the Reserve Bank of India (RBI) monetary policy which is set to be announced on Thursday. With rate cut in offing, it is now pegged that banks will be among the major winners here, as their borrowing cost will become lower which will give further boost to their credit growth. Ahead of the RBI policy on Wednesday, the banking stocks were among major losers as investors removed their money heavily. The Nifty Bank finished at 30,036.25 down by a whopping 260.95 points or 0.86%. Almost every bank stocks were trading on a negative note, with lenders like IndusInd Bank, HDFC Bank, Bank of Baroda, Kotak Bank, Axis Bank, ICICI Bank, SBI, Federal Bank, PNB, RBL Bank and Yes Bank plunging by 3.97% to 0.09%. However, now that only few hours are left in RBI’s policy announcement by Shaktikanta Das and MPC members, analysts have now given new buy calls on banking stocks which can be a money making magnet for investors.

Analysts at Chola Securities said, “With repo rate cuts in the pipeline, banks could see a near term spike in NIMs due to reduced borrowing costs and lag in MCLR resets affecting book yields. While the NIMs will return to normal in long run, reduced interest rates could have a positive impact on credit growth, which is already at 14.1% (as on 1st March 2019).”

They added, “This apart, quarterly cut announced in SLR by MPC in its January meeting along with the recent tranche of capital infusion in February, worth INR 482bn in PSU banks (cumulative INR 1.06tn) and the first of its kind, rupee dollar swap in March (INR 346bn or USD 5 bn) has further enhanced the liquidity in the system, which could act as a catalyst to the credit growth.”

On NBFC, Chola said, “In the current scenario where NBFCs are facing tight liquidity conditions, banks are expected to see much higher credit growth by gaining significant market share in the home loans, PVs, CVs and 2 wheeler portfolios.”

Hence, Chola has given buy rating on these stocks which can become a good bet for investors. They are:

SBI!

NIMs currently at 3%. With lower fresh delinquencies and higher credit-deposit ratio, the management expects to see improvement in margin in 4QFY19 and in FY20. Profitability to further accrue from growth in high yielding unsecured loans segment, the asset quality of which has been held up well to date.

Technically, SBI breached short term resistance at 320 and trending towards long term resistance at 350. If price breaches this levels, we can expect 400 in medium term. Short term support is seen at 280.

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RBL Bank!

The management expects loan book to grow at 30-35% till FY20E, with major chunk coming in from the credit segment. NIMs are expected to remain at current levels of 4.1%. The management also plans to add 25 new branches in 4QFY19 and 60-70 branches in FY20E to further aid in CASA accretion targeting a growth of 0.75-1% every year, till FY20 in CASA ratio (currently at 24.6%).

Technically, RBL Bank breached medium term resistance at 650 and trending towards 161.8% Fibonacci extension at 780. Short term support is seen at 600.

Indiabulls Housing finance!

The management has guided for a steady sell down of loans, worth INR 40-60bn, for funding loan growth going ahead. The company expects the PAT to grow at 15-16% YoY in FY19, with stable spreads at 3.00-3.25%. For FY20, the management has guided for an AUM growth of 20-25%, net income growth of 17-19%, and balance sheet growth of 10%.

Technically, the stock breached short term resistance at 850 and trending towards long term resistance at 1100. Short term support is seen at 750.

Currently, policy repo rate stands at 6.25%, with reverse repo rate at 6%, while MSF and bank rate at 6.5%. In previous policy, RBI governor Shaktikanta Das and MPC panel also changed the India’s policy stance to neutral from previous calibrated tightening.