Banks stocks gain after RBI maintains status quo

Shares of the banking sector traded higher after the Reserve Bank of India (RBI) kept the policy repo rate unchanged while maintaining its accommodative stance after the conclusion of the Monetary Policy Committee (MPC) meeting today, 8 October 2021. The Nifty Bank index was up 0.40% at 37,903.95. Meanwhile, the Nifty 50 index was up 0.7% at 17,914. Bandhan Bank (up 3%), AU Small Finance Bank (up 1.55%), RBL Bank (up 1.4%), ICICI Bank (up 0.53%), Axis Bank (up 0.44%), HDFC Bank (up 0.34%), Kotak Mahindra Bank (up 0.33%), IDFC First Bank (up 0.21%), SBI (up 0.19%) and IndusInd Bank (up 0.04%) advanced.

RBI kept repo rate unchanged at 4% and maintained an accommodative stance. Reverse repo rate stands at 3.35%.

RBI maintained the FY22 GDP growth forecast at 9.5%. This includes 7.9% in Q2, 6.8% in Q2 and 6.1% in Q4. For Q1 FY23, GDP growth has been pegged at 17.2%.

CPI inflation is seen at 5.3% for this fiscal. In Q2, it is seen at 5.1%, 4.5% in Q3 and 5.8% in Q4, with risks broadly balanced.

All six members of the MPC voted to keep rates unchanged, but JR Varma, an external member, voted for the second consecutive time to end the accommodative stance.

The Governor said that high-frequency indicators indicated that the economy has gained momentum which will be further aided by the upcoming festive season. Although, he acknowledged sticky inflation, he does believe that we can expect softening retail inflation in the near term.

” Growth impulses are strengthening, inflation trajectory more favourable than expected,”, he said in his address today.

RBI Governor Shaktikanta Das said the MPC voted to maintain an accommodative stance “as long as necessary to revive and sustain growth and mitigate the impact of COVID19 pandemic while ensuring inflation remains within the target”. The reverse repo rate also remains unchanged at 3.35%.

(With inputs from Capital Market – Live News)