Banking shares rose on Friday pushing the benchmark Sensex higher by over 500 points after the Economic Survey said the government will achieve fiscal deficit target of 3 per cent of gross domestic product in the medium-term.
This led to high hopes from the Reserve Bank of India for a rate cut after the Budget.
The Bank Nifty, benchmark index for banking shares surged over 3 per cent. Bank of Baroda was the top Nifty gainer trading with 5.6 per cent gains, while SBI, PNB and ICICI Bank added over 3 per cent each.
The Economic survey presented in the Parliament today reiterated that the government would not overshoot its deficit target of 4.1 per cent of gross domestic product in the current fiscal year just ending, and stood by a medium-term target of cutting it to 3 per cent of GDP.
Analysts say if Budget to be presented tomorrow confirms the GDP and fiscal deficit numbers given in the economic survey, then rate cuts are possible after budget.
"Given where crude is, I don't see why RBI can't cut rates. If budget sticks with these numbers of economic survey then I would not be surprised to see a rate cut by the Reserve Bank of India on Monday," said S Ramasamy, chief investment officer, LIC Nomura Mutual Fund.
Bank Nifty ended 2.9 per cent higher outperforming the broader Nifty, which closed with 1.85 per cent gains.
(With inputs from Reuters)
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