RBI policy impact on Bank Nifty: SBI, HDFC Bank gain up to 2%; banking index up 300 points

Banking stocks, including heavyweights SBI, HDFC Bank, Bank of Baroda and IndusInd Bank, gained up to 2 percent on February 8 opening deals ahead of the Reserve Bank of India’s Monetary Policy Committee (RBI MPC) announcement.

The RBI is expected to keep repo rates steady at 6.5 percent for the sixth consecutive time, analyst say.

The Bank Nifty index gained nearly 300 points or 0.6 percent to trade at 46,108 ahead.

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As banks’ lackluster performance has kept the markets range-bound in recent sessions, Ajit Mishra, senior vice-president of technical research at Religare Broking, said any hint of a rate cut could prompt an up move in private banking players such as ICICI Bank and Axis Bank, lifting the market sentiment. “Bank Nifty maintaining levels above 47,000 could signal a shift towards a positive bias in the trend,” he said.

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According to a Moneycontrol poll, the RBI is likely to leave the key interest rates unchanged. An overwhelming majority of the economists polled also said the central bank would maintain the policy stance of “withdrawal from accommodation”, largely continuing the approach of recent months.

The RBI has held the repo rate steady since February 2023, as inflation remained within the 2-6 percent target range.

Nuvama Institutional Equities analysts anticipate no immediate discussion or guidance on the rate cut trajectory. “We believe rate cuts remain a distant possibility,” they said, citing elevated headline inflation.

Headline inflation touched a four-month peak of 5.7 percent in December due to higher food prices and an unfavourable base. However, core inflation dropped below the 4 percent-mark in December, first since the onset of Covid-19 pandemic.

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