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Jefferies India stock recommendations | Stocks to buy today: After the announcement of a 25 bps Repo Rate hike by the Reserve Bank of India (RBI) post-three-day Monetary Policy Committee (MPC) meeting on Wednesday morning, the Jefferies India has gone highly bullish on the Indian banks. The global investment bank believes the RBI's Repo Rate hike may serve as a catalyst for Indian banks. Jefferies India believes RBI's 25 bps rate hike to 5.5% was on expected lines, but the change in policy stance to calibrated tightening lifts consensus rate-hike expectations to 75-100 bps (from 50 bps). It now prefers banking stocks over NBFCs. Decoding the RBI's MPC meeting outcome, the Jefferies India report said, “RBI's rate hike of 25 bps to 5.5% was on expected lines, but a change in policy stance to calibrated tightening lifts consensus rate hike expectations to 75-100 bps (from 50 bps). This can be a positive catalyst for the earnings of larger private banks, PSU banks and HFCs, whereas a slight risk for smaller private banks, NBFCs and LIs. This may also help Indian banks' performance relative to global financials.” Explaining the impact of the change in stance at the RBI MPC meeting, the global investment bank said the central bank announced a 25 bps hike in the repo rate to 5.5%. More importantly, it also changed the stance from 'Neutral' to 'Calibrated Tightening' due to higher-than-expected inflation. A change in stance implies there won't be scope for rate cuts, and we may see tighter liquidity conditions through interventions, leading market rates to rise more than the RBI rate. This could lead to RBI rate hikes in the 75-100 bps range, instead of the consensus of 50 bps. The Jefferies India report believes Indian banks, especially large private banks, have a higher share of policy-rate-linked loans that reprice over 1-3 months. Banks with a higher share of EBLR loans and reasonable domestic LDR could see some positive earnings over the next 3-6 months. “If we assume a 75 bps hike in rates seeping into yields based on the share of EBLR and banks retain 15% of the same, it can lead to an earnings upgrade for banks or offset pressure on earnings in case of PSUs' wage hike / ECL transition,” the report said. The global investment bank said that an improving earnings trend can aid banks' profitability, especially relative to NBFCs, as discussed in our recent report. It is also interesting to note that over the past two years, Indian banks have underperformed global banks (by 55 ppt), even as global banks benefited from improving growth and margin outlooks. On top stock picks in the banking segment, Jefferies India report said, “ICICI Bank, SBI, and Axis Bank are our top picks among large-cap banks.” Disclaimer: This story is for educational and informational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified financial experts before making any investment decisions. Asit Manohar has nearly two decades of experience in the mainstream media. In this period, he has served esteemed media organisations like NDTV Profit, The Economic Times, and Zee Business. He has been working at LiveMint Digital since April 2021. During these two decades of journey in mainstream media, Asit has mainly covered external affairs, markets and personal finance. However, his earliest beats include railways, SME, MSME, and politics (Congress beat). Some of his features on political, economic, and foreign policy are documented in the parliamentary records. <br><br> While pursuing his MA (Mass Communication, Session 2004-06), Asit began his media career as a stringer at All India Radio in Varanasi. At AIR Varanasi, Asit worked with the Gyanvani, Yuvvani and Vividh Bharti teams. After working for nearly one year at AIR Varanasi, he shifted to print journalism and started working as a stringer for the HT Media Ltd, Varanasi. At HT Media Ltd in Varanasi, he covered the BHU beat. <br><br> Asit has also worked with some brokerage houses. He has worked with Religare Broking and India Infoline, where he assisted the research team in developing and executing trade strategies for intraday cash, F&O, and commodities. <br><br> Asit is a Gold Medalist in MA (Mass Communication) from BHU, Varanasi. He did his BSc. (Hons) in Mathematics from Magadh University, Bodh Gaya. Asit was a National Talent Scholarship holder during his senior secondary studies (1988-91). Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates. Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.
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