Consensus estimates are of a hike in repo and reverse repo to the tune of 25 bps and CRR to be maintained at the same rate.
On the other hand, market rumors are of a 50 bps hike in repo and reverse repo. This could bring in short term weakness in interest rate sensitive stocks. For the current year despite higher inflation, consumption story has remained intact and we have not seen any significant slowdown. However incremental rise in inflation could hurt and that could affect interest rate sensitive stocks.
RBI has maintained its hawkish stance on inflation and overall we have seen structural inflation climb higher.
Also there is expectation that post the state elections we could see government increasing petrol and diesel prices. This will further add to the inflation and thus hawkish stance by RBI is expected to be maintained in the short term to keep a lid on inflation. Overall expectation of some correction in crude combined with the prospect of some relief in terms of diesel price and petrol price rise could bring some contra rally in oil refining psu stocks.
(Subject to disclaimer at www.unicon.in)