Bank stocks, including ICICI Bank, Axis Bank, HDFC Bank and State Bank of India, witnessed decent gains after the RBI MPC maintained the status quo on key lending rates and maintained an accommodative policy stance.
The Nifty Bank index rose almost 3 percent in intraday trade with most components trading with gains.
Bank stocks rose after the RBI indicated it will keep the system adequately liquidated.
RBI said the focus of liquidity measures by the RBI will now include the revival of activity in specific sectors that have both backward and forward linkages and multiplier effects on growth.
RBI's measures to revive the economy, including enhancing liquidity support for financial markets and deepening financial inclusion, are also see as positives for the banks.
Moreover, RBI's announced extending the framework for the co-origination of loans by banks and a category of NBFCs.
"This 'Co-Lending Model' is expected to leverage the comparative advantages of banks and NBFCs in a collaborative effort, and improve the flow of credit to the unserved and underserved sectors of the economy," RBI said.
Analysts maintained a positive stance on banking stocks after the RBI announced these measures.
Amar Ambani, Senior President & Institutional Research Head of YES Securities is of the view that the rationalization of risk weights on Individual housing loans, now linked only to LTVs, for all new HL sanctioned till March 2022, is a positive for banks.
Abhimanyu Sofat, Head of Research, IIFL Securities said despite not cutting the benchmark interest rate, RBI announced a significantly dovish monetary policy will slew of measures.
"Doubling of the size of open market operations to Rs 20,000 cr, RBI participation in state development loans, allowing co-origination of loans by HFCs are combined big-ticket announcements for both bond market and financial sector stocks," Sofat said.
Sofat believes housing finance companies, small NBFCs are likely to outperform as a result of these announcements.
"Investors can increase their allocation to the BFSI space as we see more availability of money at a lower cost to help in a strong rebound in the sector," Sofat said.
Asutosh Mishra, Head of Research, Ashika Institutional Equity said he maintained a positive stance on banking and the NBFC sector.
He prefers HDFC Bank (best placed on growth as well as the overhang of management change will be behind us), ICICI Bank and IndusInd Bank (valuation pick along with better operating income growth), SBI (management change overhang will be behind us), DCB Bank ( almost all clients will get benefits of Govt relaxation), IDFC First Bank (positive earning movement due to restructuring of the balance sheet), and Equitas (growth is returning back and all clients will get benefits of government relaxation)," said
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