1 hr ago
Jefferies Favors Largecaps as RBI Begins Calibrated Rate Tightening
India’s central bank has raised the main interest rate by a small amount.
It also changed its message to suggest that more rate increases could follow.
Jefferies says higher rates can make investors more cautious and can put pressure on share prices.
It expects this round of rate increases to be smaller than the one in 2022.
The RBI raised its forecasts for both economic growth and inflation.
Jefferies thinks stronger growth could help company earnings, even as inflation remains a concern.
That is one reason it prefers shares in larger companies.
Its preferred picks include RIL, Bharti Airtel, large banks and power utilities.
The RBI raised its repo rate by 25 basis points to 5.50% after holding it for nine months.
The Monetary Policy Committee shifted its stance from neutral to calibrated tightening in a 4-2 vote.
Jefferies expects the tightening cycle to be shallower than the 2022 cycle, but says the RBI could deliver more hikes than previously expected.
Jefferies raised its FY27 CPI inflation estimate to 5.2% and noted the RBI expects inflation to reach 5.8% over the next three quarters.
The brokerage favors largecaps, including RIL, large banks, Bharti Airtel and power utilities, citing relative valuations and earnings prospects.
- Who
- The Reserve Bank of India and its Monetary Policy Committee; Jefferies provided the market analysis.
- What
- The RBI raised the repo rate by 25 basis points to 5.50% and changed its policy stance to calibrated tightening.
- Where
- India.
- When
- The RBI had held rates for the previous nine months before the decision; no calendar date is stated.
- Why
- The RBI cited an outlook involving inflation and growth; Jefferies highlighted rising crude prices, weak monsoon rainfall and global bond-market conditions as relevant pressures.
Key facts
- Repo rate after hike
- 5.50%, following a 25-basis-point increase
- Monetary Policy Committee vote
- 4-2 in favor of changing the stance to calibrated tightening
- Jefferies FY27 CPI estimate
- 5.2%, up 0.2 percentage point
- RBI FY27 GDP growth estimate
- 7.1%, up 0.4 percentage point
- June-quarter GDP growth
- 7.8% for 1QFY27
- Jefferies’ largecap preferences
- RIL, large banks, Bharti Airtel and power utilities
- Earlier rate-cycle comparison
- The RBI raised rates by 250 basis points in the 2022 episode
Sources
Related news
RBI Raises Rates, Signals Further Hikes or a Pause Ahead
RBI Raises Repo Rate to 5.50% as Inflation Pressures Broaden
Global Rate Hikes Put Indian Stocks Under Fresh Pressure
RBI Rate Hike Puts 7.25% Bond Yield Level in Focus
Jefferies Favors Large-Caps, Adds Kotak Bank and Welspun
RBI Rate Hike Sends Indian Markets Lower
Jefferies Sees Power Stocks Rising Despite RBI Rate Hike
Levi Strauss Shares Face Pressure Ahead of Third-Quarter Earnings
HDFC Bank Shares Fall 29% as Anup Bagchi Takes Charge
Jefferies Sees Strong NBFC Earnings, Names Preferred Stocks
