The Bank Nifty surged nearly 1.4 per cent to touch a fresh 52-week high of 17,373.35 on Wednesday. Sector heavy weight State Bank of India and Axis Bank gained over 2 per cent each while HDFC Bank and ICICI Bank were up around 1 per cent.
Traders bought banking shares as hope of rate cut by Reserve Bank of India increased after crude oil continued its fall on Wednesday. The Brent crude fell below $83 dollars per barrel mark on Wednesday as weak economic data from China stocked worries. Falling crude oil price will help India achieve lower inflation.
The Royal Bank of Scotland on Monday said economic indicators like softening of inflation suggests that key interest rates could be slashed sooner than later by the Reserve Bank of India.
"I think the RBI is a very fine institution and it is their job to take a call on monetary policy, rate cut and inflation...but the indicators seem to suggest that rate cut would be sooner rather than later," said RBS country executive Brijesh Mehra.
Yield on 10-year benchmark government bond which fell to a low of 8.26 per cent on Wednesday also supported sentiments. When the bond yields fall, banks make mark-to-market gain in their held-to-maturity bond portfolio, which banks hold as a part of the SLR (Statutory Liquidity Ratio) requirement.
(With agency inputs)
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