ICICI Bank led gains in banking stocks after the Reserve Bank of India today pledged to ensure adequate liquidity in the system while keeping interest rates low to support growth. The Nifty Bank index surged 2% to cross the key level of 30,000 while ICICI Bank surged 4.5% to ₹503.20, the highest since March. The broader BSE Sensex today jumped 450 points to close above 45,000 for first time.
Among other banks, SBI rose 3% while Axis Bank and Kotak Bank jumped 2% each.
Analysts said that rate sensitives benefited as RBI kept its liquidity stance unchanged.
“No measures have been announced to mop up the excess liquidity in the banking system which has arisen because of high inflation and Forex sterilization. On the other hand, the RBI has assured provision of adequate liquidity to deserving segments. The real interest rate on the short end of the curve will remain severely in the negative for some time penalizing the savers. One hopes that this does not affect the savings rate materially. All in all a welcome policy announcement with RBI maintaining the liquidity rope and hoping that asset quality stress seems under control,” said Dhiraj Relli, MD &CEO, HDFC Securities.
The RBI also revised its outlook for the economy, predicting a milder 7.5% contraction this fiscal year as opposed to its reading in October for a 9.5% decline.
“RBI’s decision to keep policy rates unchanged and maintain an accommodative stance for the current and upcoming year is well taken by the market. The possibility for a further rate cut in the near term can be ruled out considering the elevated levels of inflation. However, positively RBI has ensured ample liquidity support on a timely basis in the form of Open market operation, TLTRO and reverse repo,” said Vinod Nair, Head of Research at Geojit Financial services.
In the model portfolio, domestic brokerage Motilal Oswal Financial Services is overweight on BFSI among others with ICICI Bank and SBI among its top picks.
“Most managements indicated an encouraging asset quality outlook led by a sharp improvement in collection trends and low restructuring guidance. Banks saw massive earnings upgrades on the back of an improving asset quality outlook and recovery in business trends. Slippages are set to increase over 2HFY21 post the SC order on a moratorium of term EMI payments, but we expect the same to normalize from FY22 onwards,” the brokerage said.
#ICICI #Bank #share #price #crosses #time #March