Banking Stocks Rally As Investors Expect CRR Cut; Stocks To Buy Ahead Of RBI MPC Outcome – News18
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Among private banks, HDFC Bank rose around 2%, making it one of the biggest gainers on both the Nifty and Sensex.
Banking Stocks Rally Ahead Of RBI MPC
Several banking stocks, including HDFC Bank, ICICI Bank, and SBI, posted strong gains on Wednesday, December 4, driven by expectations of supportive monetary policy from the Reserve Bank of India (RBI).
Shares of PSU banks like UCO Bank and Central Bank of India surged by up to 8% as the RBI’s rate-setting panel began a three-day meeting. The entire financial sector showed positive momentum, with the Nifty Bank and Private Bank indices rising nearly 1% each, while the PSU Bank index gained almost 1.5%. The Nifty Financial Services index climbed over 1%.
Among private banks, HDFC Bank rose around 2%, making it one of the biggest gainers on both the Nifty and Sensex.
The rally in financial stocks is fueled by market expectations that the RBI may announce a Cash Reserve Ratio (CRR) cut this Friday, which is seen as a move that could boost bank profitability.
Could a CRR Cut Benefit Banks?
Global brokerage firm Citi stated that a 50 basis point CRR cut would provide the largest net interest income (NII) benefit to PSU banks like PNB, SBI, and Bank of Baroda. In the private banking sector, Federal Bank, HDFC Bank, and Axis Bank are expected to benefit.
Aamar Deo Singh, Senior Vice President of Research at Angel One, suggested that a reduction in the CRR, currently at 4.5%, would increase flexible resources for banks, thereby enhancing their profitability.
Abhishek Pandya, a research analyst at Stoxbox, noted that the Nifty Bank index has risen by 6% over the past eight trading sessions, reflecting strong bullish momentum. This increase is largely attributed to expectations that the RBI will cut the CRR by 25 basis points, from the current 4.50% to 4.25%. “This CRR reduction is expected to enhance liquidity in the market,” Pandya explained.
Pandya also highlighted that Q2 results revealed a slowdown in credit growth, which had dropped to 12-13% from 17-18% previously. A CRR cut could help stimulate credit growth once again.
The RBI’s Monetary Policy Committee (MPC) meeting began on Wednesday, December 4, with the policy decision set to be announced on Friday, December 6.
Banking Stocks to Buy
“In a period marked by declining credit growth and significant asset quality concerns, HDFC Bank, ICICI Bank, and SBI stand out as strong investment choices for the medium to long term,” said Pandya.
Vikas Jain, Head of Research at Reliance Securities, recommended SBI, Union Bank, Canara Bank, and RBL Bank as promising stocks from current levels.
Ajit Mishra, SVP of Research at Religare Broking, advised a selective approach within the banking sector, despite the recent strong performance of the banking index. He highlighted HDFC Bank, Federal Bank, and ICICI Bank among private banks, while SBI and Bank of Baroda were noted as top picks in the PSU segment due to their relative strength.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
