Union Bank To Axis Bank: Lenders' Stocks Rise After RBI Liquidity Boost
Citi Research said the RBI's move is 'sentimentally positive' for banks with stretched loan-to-deposit ratio.
Shares of banks — both private and public — along with those of non-banking financial companies soared on Tuesday, after the central bank announced special measures to ease liquidity in the system.
The Reserve Bank of India announced bond purchases via open market operations worth Rs 60,000 crore, a 56-day variable rate repo auction for an amount of Rs 50,000 crore and a dollar-rupee buy-sell swap auction of $5 billion for six months.
Analysts expect these measures to be positive for banking and non-banking lenders, while they will augment durable liquidity. Citi Research said the central bank's move is "sentimentally positive" for banks with stretched loan-to-deposit ratio, like HDFC Bank Ltd., Axis Bank Ltd., Federal Bank Ltd., and Bank of Baroda.
"Liquidity measures will release some deposit/credit growth challenges engulfing the sector over the past few months," a note said.
Morgan Stanley said RBI's "multi-pronged approach to undertake liquidity management" will augment durable liquidity, against a backdrop of adverse seasonal factors in the second half of the current fiscal and volatility from capital flows.
The RBI will continue to monitor evolving liquidity and market conditions and take measures as appropriate to ensure orderly liquidity conditions, it said.
Shares of Union Bank of India Ltd., Bank of India Ltd. and Indian Bank were the top gainers in the Nifty PSU Bank. Union Bank of India and Bank of India gained over 3%, while Punjab National Bank Ltd., Bank of Baroda Ltd. rose over 1% on Tuesday.
The banking gauge — Nifty Bank — rose 1.24% to 48,663.6 in early trade and pared gains to trade 1.09% higher at 9:40 a.m. This compared to a gain of 0.26% in the benchmark NSE Nifty 50.
AU Small Finance Bank Ltd. was the top gainer, with a gain of over 3% while, IDFC First Bank Ltd. and Axis Bank were among the other gainers in the Nifty Bank.
In the NBFC space, Mahindra & Mahindra Financial Services Ltd., LIC Housing Finance Ltd., Bajaj Finance Ltd., and Shriram Finance Ltd. gained in early trade.
