THE LIKELY RATE CUT.....!!!!!!!!!

THANKS TO ET FOR BOTH THE ARTICLES....
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Good time invest in rate sensitive stocks like Tata Motors, Mahindra & Mahindra, HDFC Bank, Bank of Baroda
http://economictimes.indiatimes.com/markets/analysis/good-time-invest-in-rate-sensitive-stocks-like-tata-motors-mahindra-mahindra-hdfc-bank-bank-of-baroda/articleshow/11401421.cms?curpg=1

Experts are almost unanimous in predicting the direction of interest rates for 2012. This is because of two major factors. First, barring unforeseen circumstances like a spike in the global crude oil prices, domestic inflation should come down. Second, economic growth has slowed drastically forcing the RBI to shift the focus from inflation to it. "The RBI will start cutting rates when inflation numbers improve to kickstart growth," says Sameer Kamdar, CEO & MD, ASK Investment Managers.

So, it might be a good time to invest in rate-sensitive sectors now, but don't do so blindly. "While rate-sensitive sectors should yield good 12-month results, they will face some tough times before they start reversal," says Kislay Kanth, senior director, research, MAPE Securities. This is because falling interest rates will reflect in the fundamentals of the company with a lag. For example, it takes a few quarters before the 'low interest rates' start reflecting as 'low interest costs' for the companies because the loans taken at higher interest rates need to be repriced.

So, investors should concentrate only on the stronger segments of the rate-sensitive sectors, which means avoiding infrastructure and real estate. Also, pick only large caps. This is because there are several other factors that will affect the market price of these stocks and falling rates is only one of them. For instance, the biggest worry facing the banking sector currently is the delinquency on its loan books, and these write-downs may continue for some more time even after the RBI starts reducing the rates. Here are our top picks.

Tata Motors 

Domestic interest rates will impact Tata Motors on two counts. First, it will help lessen the huge debt on its books. "With the rates coming down, Tata Motors will be able to refinance at a lower rate. This will help reduce its interest cost burden," says Kishor Ostwal, CMD, CNI Research. Second, the falling rates will boost its domestic sales. The company has already posted good sales for December, which went up by 47% compared to the same period last year. While its light commercial vehicles and diesel passenger cars are doing well, an economic pickup will boost its currently sluggish heavy commercial vehicles. The market is bullish on the firm more for its excellent performance on the Jaguar and Land Rover business, whose demand is up.

Mahindra & Mahindra 

M&M could show decent volume growth and report much better numbers when the rates go down. Its domestic passenger vehicle sales for December increased by 24% compared to the same period last year. Considering the buoyancy in demand, the company could pass on the impact of the falling rupee and rising input costs by increasing the price of its new car, XUV 500, by up to Rs 55,000 this month. Though the tractor segment may show lacklustre growth in the third quarter, it is expected to improve in the fourth quarter. This evergreen segment should continue at 10% annualised volume growth in the coming years.

HDFC Bank 

"The current sell-off in the banking sector has brought down the valuations. Investors should use this opportunity to buy good banks, such as HDFCBank, at current valuations," says Murali Gopal, banking analyst, BRICS Securities. The bank was able to sustain a high 30%-plus growth rate in its net profit despite the difficult operating environment. As the interest rates come down, the demand for corporate loans should improve further. Expanding reach, with the help of more branches, should help HDFC Bank to improve market share. More importantly, it is able to maintain its non-performing assets (NPAs) close to the 1% band and so, is relatively free from asset quality worries.

Bank of Baroda 

While Bank of Baroda can boast high asset quality and its gross and net NPAs are placed only at 1.4% and 0.47%, respectively, it is quoting at much lower valuations compared to private banks with similar asset quality. This is because the comparisons are usually done among the PSU banks where increased delinquencies are a major threat. However, analysts insist that Bank of Baroda is the best among public sector banks and should be treated separately. "Bank of Baroda has conservative accounting practices and we believe that it should report much less NPAs compared to other PSU banks," says Dinesh Shukla, banking analyst, Sharekhan.