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Why ICICI Bank Ltd (ICICIBANK), HDFC Bank Limited (HDFCBANK), And Tata Motors Limited (TATAMOTORS) Will Benefit From Rate Cuts

ICICI Bank Ltd (NSE:ICICIBANK) (NYSE:IBN), HDFC Bank Limited (NSE:HDFCBANK) (NYSE:HDB), and Tata Motors Limited (NSE:TATAMOTORS) (NYSE:TTM) are three companies which will benefit most from rate cuts which are expected in the upcoming RBI meeting.

The RBI’s next meeting is slated for August 4 where it will review monetary policy. There are two viewpoints, one in favor, and another against. Moody’s and Bank of America Merrill Lynch expect a rate cut of 25 basis points despite retail inflation reaching an eight-month high. On the other hand, rating agency CARE expects the status quo to be maintained.

ICICI Bank Limited (ADR) (NYSE:IBN)

The RBI Deputy Governor, Urjit Patel, recently said that though inflation and fiscal condition showed improvement, macro conditions have not changed after the June 2 policy. That might indicate that a rate cut is unlikely. However, he pointed out that it is the CPI data that will play a crucial role. Inflation for June was 5.4% while the average inflation between 2012 and 2015 was 8.44%. The IIP for May indicated slower growth of 2.7%. Industries are looking for a rate cut.

ICICI Bank Ltd (NSE:ICICIBANK) is the biggest one in the private sector. Its management has always overcome any adverse market conditions. One of the major focuses for the bank is housing loans. The reduction in interest rates will directly benefit home buyers. For quite some time, the housing sector has witnessed slowdown. The lower interest rates will stimulate a higher demand for housing. That will benefit ICICI Bank Ltd (NSE:ICICIBANK) in terms of the volume, as well as the amount. Automobile and electronics financing will also grow due to lower interest rates. Good weather ensures that there is will be no default on re-payment of loans to farmers. The simplification of foreign investment will also help.

HDFC Bank Limited (NSE:HDFCBANK) has performed well whether interest rates are high or low. The belief is that any reduction in rates will mean lesser opportunities to grow revenue. However, the lower interest rates will provide the banks more opportunity to earn fee-based income since the volume of transactions will grow. That is primarily because the number of consumers or individuals taking loans will grow. Its focus on automobile and electronic items will yield better results. The stock has been steadily rising over the years.

Tata Motors Limited (NSE:TATAMOTORS)’s vehicles enjoy the confidence of rental companies. The lower interest rates will be a big push for the automobile sector. The company witnessed 6% sales growth in June and seems to be expecting more in the coming months as the demand will pick up in the third quarter. One of the biggest gainers from the international oil price slide has been the automobile sector. The lower rates at the retail level stimulate consumers to opt for four-wheelers. Also, Tata Motors Limited (NSE:TATAMOTORS) has been launching different models to lure consumers.

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