Synopsis
Analysts said sentiment in banks improved after the RBI’s guided for lower inflation, which raised hopes that the central bank could resort to less aggressive rate hikes going forward. The RBI retained its key lending rate and maintained an accommodative stance, contrary to expectations of a reverse repo rate.
Mumbai: Banks stocks surged on Thursday as traders squared off their bearish bets after the Reserve Bank of India’s monetary policy review was perceived to be dovish.
The Bank Nifty rose 1% with Federal Bank, HDFC Bank, Kotak Mahindra Bank and SBI gaining 1-2%.
Analysts said sentiment in banks improved after the RBI’s guided for lower inflation, which raised hopes that the central bank could resort to less aggressive rate hikes going forward. The RBI retained its key lending rate and maintained an accommodative stance, contrary to expectations of a reverse repo rate.
“The policy was more dovish than expected,” said Gautam Duggad, head of research-institutional equities at Motilal Oswal Financial Services.
“The sector view is positive as large banks have beaten expectations on earnings and asset quality has also improved. As and when rates go up, their lending rates will get repriced,” said Duggad. SBI, ICICI Bank and HDFC Bank are his top ideas in the banking space.
The Bank Nifty is up 10% so far this year while the Nifty has gained 1.45% during the same period.
Analysts said all components of the banking index are showing strength which could help the index head higher. Traders have been covering short positions in Bank Nifty while some long build-up has also happened.
“We are optimistic on the Bank Nifty, HDFC Bank has given a breakout from a consolidation pattern. HDFC Bank was partly the reason Bank Nifty had not been doing well,” said Siddarth Bhamre, director, alternative investments and research, InCred Equities.
He said Axis Bank is in a strong upmove and ICICI Bank’s chart also shows it can have further upmove. SBI is also doing well, he said.
