The Bank Nifty index rallied on Wednesday, 4 December, gaining more than 1 percent, as optimism built around potential liquidity measures in the Reserve Bank of India’s (RBI) upcoming monetary policy meeting. Expectations of a potential Cash Reserve Ratio (CRR) cut drove gains across banking stocks. PSU banking index outshone private banking index in gains today.
At about 2:15 pm, the Bank Nifty index was up 1.3 percent or 680 points at 53,375. The Nifty PSU Bank index was up 2.6 percent, while the Nifty Private Bank index added nearly 1 percent. Meanwhile, benchmark equity indices saw milder gains -- BSE Sensex rose 300 points to 81,145, and NSE Nifty gained 69 points, or 0.3 percent, to 24,526.
The Bank Nifty’s rally was supported by strong performances from key banking stocks. HDFC Bank surged 2.1 percent to Rs 1,865, contributing 154.28 points to the Nifty, while ICICI Bank gained 0.9 percent to Rs 1,320. State Bank of India (SBI) added 1 percent to trade at Rs 863, and Bajaj Finance rose 1.2 percent to Rs 6,753. Kotak Mahindra Bank also advanced 0.6 percent to Rs 1,759.
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Optimism over RBI liquidity measures, CRR cut
Investor sentiment has been buoyed by expectations that the RBI may announce measures to boost liquidity in its monetary policy review later this week. While most economists polled by Moneycontrol expect the RBI to keep policy rates unchanged for an eleventh consecutive time due to elevated inflation, weak GDP growth figures have fuelled speculation of a CRR reduction.
A cut in the CRR would infuse liquidity into the banking system, freeing up funds that banks would otherwise need to maintain with the RBI. Economists argue that this move could spur credit growth and investment, providing a much-needed boost to the economy. This could be particularly supportive for banks, with public sector lenders expected to benefit significantly.
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