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Informist, Friday, Jun. 6, 2025

MUMBAI – Banking stocks are set for another strong week after the Reserve Bank of India surprised markets with a bigger-than-expected 50-basis-point cut in the repo rate and a sharp 100-bps reduction in the cash reserve ratio of banks. The move lifted market sentiment and sparked a broad rally across financial stocks, with analysts expecting further gains for the Bank Nifty next week.

The repo rate now stands at 5.50%, down from 6.00%, marking a deeper easing than the widely anticipated 25-bps cut. The central bank also announced a phased reduction in the CRR--from 4% to 3% of banks' net demand and time liabilities. The reduction in CRR will be carried out in four tranches of 25 bps each with effect from the fortnight beginning Sept. 6. The CRR cut is expected to release INR 2.5 trillion into the banking system, providing a strong liquidity buffer.

Following the RBI's policy outcome, Bank Nifty appears poised to sustain its uptrend, analysts said. Kotak Securities said in a note that the index has broken out of its recent range on daily charts. "Key support levels lie at 56,000 and 55,500. Above these, the index can gain further towards 57,200–57,700," it said. However, the broking firm cautioned that a fall below 55500 may weaken the positive bias.

"Today's (Friday) announcement will not only push banks' external benchmark linked lending rates lower, but will also lower MCLR (marginal cost of funds based lending rate) and deposit rates, thereby, bringing in greater pace and intensity to transmission," Siddhartha Sanyal, chief economist and head of research at Bandhan Bank, said. 

Nifty Bank index Friday closed 1.5% higher at 56578.40. Of the nine constituents of the index, only Bank of Baroda closed in the red, falling by 1.8%. IDFC FIRST Bank was the top performer, surging 7% from Thursday.

One of the more interesting turnarounds was IndusInd Bank. RBI Governor Sanjay Malhotra's comment that the resignation of Sumanth Kathpalia as managing director and chief executive officer of IndusInd Bank was "good enough" helped reverse a fall in the bank's stock, which had taken a severe beating following revelation of accounting discrepancies. The stock Friday rose over 5% to a one-month high of INR 845.85 before closing at INR 822.85, still up 2.5% from Thursday. The RBI's relaxed stance eased fears of more high-profile exits from the bank. Deputy Governor Swaminathan J. added that the issue would "settle down very soon." Malhotra, responding to questions on the matter, said, "Let the law take its own course."

Research houses struck a note of optimism but advised caution. InCred Research said, "Large private banks rallied on easing liquidity and faster deposit rate cuts. Uncertainty on extent of repo cuts and growth will cap rerating in the near term."

According to analysts, the mood across the Street remains upbeat for now. Traders are watching if the Nifty Bank index can hold above 56000 to confirm sustained bullish momentum. With the liquidity tap open and rate transmission expected to pick up, the near-term outlook for bank stocks appears constructive.

As the impact of policy transmission plays out over the next few weeks, banks may not only benefit from stronger loan growth but also see net interest margins stabilise as cost of funds comes down. Investors will closely track deposit growth, loan disbursals, and trends in lending rates for cues on whether the rally will continue.

TOP HEADLINES

* RBI Policy: Credit transmission still lagging despite surplus liquidity

* RBI Policy: Kathpalia's resignation as IndusInd Bk MD "good enough": Malhotra

* RBI Policy: CRR cut by 100 bps to 3% of NDTL, to infuse INR 2.5 tln liquidity

* RBI Policy: Text of MPC's second bi-monthly statement for FY26

* Ensure bank staff safety to carry out ops, banking secy to state chief secys

* Central Bank buys 24.91% stake in Future Generali India Insurance

* Sitharaman likely to chair FSDC meeting Tue in Mumbai, say govt sources

* CCI OKs acquiring up to 9.99% stake in IDFC First Bank by Currant Sea Invest

* YES Bank to raise up to INR 160 billion via equity, debt instruments

* CA Basque Investments sells 410 mln shares of YES Bank via bulk deal

* SC notice to Axis Trustee on plea by Future Ideas' Biyani vs IBC admission

* Moody's sees asset quality of Indian banks steady despite global headwinds

* No 'road map' discussion with RBI, YES Bank terms report factually incorrect

* PRESS:IndusInd Intl looks to raise equity capital to up stake in IndusInd Bk

* Govt extends tenure of Punjab & Sind Bank MD, CEO Saha till Feb 28, 2027

* UCO Bank appoints Sumit Khandelwal as CFO with immediate effect

* PRESS: Sumitomo Mitsui Banking seeks RBI nod to  operate wholly-owned arm

* PRESS: Lenders seek relaxation from RBI's new proposed gold loan norms

* Gulshan Malik retires as SBI deputy MD; Ramesh Srinivas Rao, others appointed

* Shanti Ekambaram to retire as Kotak Mahindra Bk's director, deputy MD Oct 31

* RBI says bank credit growth fell to 11.1% in FY25, pvt banks led decline

* RBI says bank deposits grew 10.6% on year in FY25 vs 13.0% yr ago

* Data Alert: Banks' loans rise 9.8% on year as of May 16, deposits up 10%

* Canara Bank board to mull capital-raising plan for FY26 on Jun 20

Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:

End

Reported by Sachi Pandey

Edited by Ashish Shirke

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