RBI's Policy Shift Boosts Bank Stocks

9 Oct 2024 , 11:23 AM

Shares of rate-sensitive firms, such as banks and NFBCs, rose by up to 4% on Wednesday morning after the Reserve Bank of India (RBI) revised its policy stance from ‘removal of accommodation’ to ‘neutral’. The Sensex rose 500 points, driven by financial gains.

Following a three-day meeting of the monetary policy committee (MPC), RBI Governor Shaktikanta Das maintained the repo rate at 6.50% for the tenth straight time but changed his position.

In his policy speech, Das highlighted that certain NBFCs are seeking development without risk management, but underlined that overall NBFC sector was healthy.

The shift in stance is being interpreted as a step towards the start of a rate cycle in December. NBFC shares led the gains, as at the start of a rate lowering cycle, NBFCs benefit more than banks.

Shriram Finance was the top gainer in Nifty, up more than 4%. Other NBFCs, Cholamandalam Investment and Bajaj Finance, were up about 3% each.

Nifty Bank was also up by 1%, with Axis Bank, SBI, PNB, and ICICI Bank leading the way with gains of 2-3% each.

Other rate-sensitive stocks, such as auto and real estate, soared by up to 6% on the announcement.

However, he stated that any reduction over the next year are projected to be small, at approximately 50 basis points, as the RBI has unofficially suggested a desired real interest rate range of 1.5-1.9%.

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