Home / Markets / Stock Markets /  Banking stocks rise as investors cheer 35 bps repo rate hike, PSU banks big winners

Banking stocks picked up momentum after RBI hiked the repo rate by 35 basis points in line with expectations on Wednesday. PSU bank stocks were big winners, while notable gains were also seen in private bankers. RBI has hiked the repo rate to 6.25% -- taking it to the highest level since August 2018. So far in FY23, RBI has been hiking the policy repo rate to tame CPI inflation which is above its tolerance limit for the tenth consecutive month.

At around 10.10 am, BSE Bankex is trading at 49,326.43 higher by 136 points or 0.22%. Nifty Bank surged by 105.95 points or 0.25% to trade at 43,244.50. On the other hand, Nifty PSU Bank rallied to nearly 1%, while a marginal upside was seen in the Nifty Private Bank index.

Under Nifty PSU Bank, Central Bank of India stock climbed by 7.4% to trade at 28.30 apiece, while UCO Bank jumped by 5.20% to perform at 22.25 apiece. Earlier, in the day, the Central Bank of India and UCO Bank touched a new 52-week high of 28.80 apiece and 22.65 apiece respectively.

Further, the Indian Overseas Bank jumped over 4%, while the Bank of Maharashtra gained by at least 2.5%, and the Bank of India climbed by over 2%. These stocks are trading near their 1-year highs.

There was a marginal upside seen in stocks like PNB, Indian Bank, Canara Bank, Bank of Baroda, and SBI. However, Punjab & Sind Bank was the top bear with a downside of over 1% followed by Union Bank of India which traded flat.

Among private bankers, ICICI Bank gained nearly a percent, while stocks like Bandhan Bank, IDFC First Bank, City Union Bank, Axis Bank, Federal Bank, and HDFC Bank edged higher.

Sonam Srivastava, Founder at Wright Research, SEBI Registered Investment Advisor on RBI rate hike said, "The markets had a muted immediate reaction, with little movement on either side. Nifty and Banks stayed on an upward bias during the announcement with some volatility. We see banks staying strong with this announcement as the interest income gets stronger with the rate hike. There is concern about the export sector given the slowdown in the global economy and consumer sectors to remain robust as rural demand is seen increasing and inflation moderating. The consumer goods sector has remained most robust today as the governor acknowledged the strong domestic economy and high manufacturing PMI."

RBI eased its repo rate hike quantum as CPI inflation showed signs of a slowdown as the economic indicator came below the 7% mark in October.

The first hike for FY23 was in May by 40 basis points in repo rate followed by three straight 50 basis points hikes between June to October 2022. Now, on an expected line, RBI hiked the repo rate by 35 basis points for the December policy.

So far in FY23, the repo rate is hiked by 225 basis points in repo rate -- taking it to 6.25%.

The latest inflation data showed that the CPI eased to 6.77% in October on the back of slower rises in food prices and a strong base effect. This is far better than a five-month high of 7.41% in September 2022.

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