Banks, Auto Stocks Gain Ahead of RBI Policy

Shares in interest rate sensitive stocks gained on Tuesday ahead of Reserve Bank of India's monetary policy. The banking benchmark index Bank Nifty was up 0.25 per cent, while the auto and realty index were up 0.5 per cent and 0.21 per cent respectively.

The Reserve Bank of India is set to announce its credit policy at 11 a.m. today.

Banks, mainly public sector banks have witnessed severe deterioration in their asset quality over last few quarters as corporates are facing problem in servicing their existing debt. Analysts believe a rate cut although may not revive the credit cycle immediately but will help these banks to recover their bad loans faster and will ease the interest burden of the companies.

Bank of Baroda gained over 1.5 per cent, while SBI was up 1.02 per cent.

Auto and realty stocks also gained as a rate cut will boost consumer demand for their products.

Tata Motors was up 0.9 per cent, while Maruti Suzuki gained nearly 0.5 per cent to Rs 3,685.

Some analysts believe that the RBI may consider going for a rate cut as the inflation has moderated and the government is on its track for fiscal consolidation.

Analysts say RBI may cut rates by 25 basis points after the government raised nearly Rs 22,600 crore through stake sale in Coal India, which will help the government achieve its fiscal deficit target of 4.1 per cent of gross domestic product this fiscal.

While, some analysts expect that there might be a rate cut today, few analysts believe RBI may wait till budget and look at how government plans to lower the fiscal deficit further.

As of 9.39 a.m. the Bank Nifty was up 0.06 per cent, CNX Auto index gained 0.82 per cent and the realty index of NSE was up 0.04 per cent.