SBI, PNB, BoB, OBC, Indian Bank shares get RBI repo rate cut boost; losses reverse

There was mixed emotions in banking stocks after RBI announced a cut in repo rate by 25 basis points once again. The moment policy was announced, Nifty Bank gave away its 30,000-level and plunged to an intraday low of 29,911.90. However, this beating from investors was short lived, as the index reversed its losses with buying witnessed in both state-owned and private banks. At around 1232 hours, Nifty Bank was trading 30,199.65 higher by 106.35 points or 0.35%. At the same time, the S&P BSE Bankex was performing at 33,878.98 up by 30.98 points or 0.09%. 

Compared to private banks, it was PSU bank stocks which were among top performers on both the indexes. 

On Nifty, PSU Bank overall index surged by 20.35 points or 0.61% to 3,352.45. Gainers list here was led by Oriental Bank of Commerce to Rs 114.35 per piece up by 2.46%. The bank was followed by Indian Bank at Rs 279.65 per piece up 1.89%, Allahabad Bank  at Rs 54.15 per piece up 1.40%, Syndicate Bank at Rs 43.55  per piece up by 1.16% and Bank of India at Rs 102.80 per piece up 1.08%. Lenders like SBI, Canara Bank, Bank of Baroda and PNB also surged in the range of 0.26% to nearly 1%.

Meanwhile, the Nifty Private Bank index was trading higher by 5.30 points or 0.03% at 17,106.80. Gainers here were, Federal Bank at Rs 96.45 per piece above 1.31%, Axis Bank at Rs 766.55 per piece up 0.66%, ICICI Bank at Rs 393.40 per piece up 0.33%, DCB Bank at Rs 199.75 up 0.20% and IDFC First Bank at Rs 54.65 per piece up 0.18%. Kotak Bank and HDFC Bank rose gradually by 0.17% and 0.12% respectively. However, Yes Bank, IndusInd Bank and RBI Bank slipped by 0.78% to 1.42%.

Now policy repo rate stands at 6% from previous 6.25%. Consequently, the reverse repo rate under the LAF stands adjusted to 5.75%, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25%. RBI governor Shaktikanta Das also maintained neutral monetary policy stance. 

This decision to cut RBI repo rate is in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth. 

प्राइस, स्टबिलिटी और ग्रोथ बना रहेगा : बृंदा जागीरदार, सीनियर इकोनॉमिस्ट#CreditPolicy @AnilSinghviZEE pic.twitter.com/vnanVJaH5O

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Which bank stock you should buy?

Sameer Kalra - Equity Research Analyst & Founder Target Investing said, "We believe this is a good position as higher cut would have showed weakness at macro level, but such poliy decisions gives confidence to the stakeholders that there is a room for further rate cut only if needed. 

LAF reduction and dollar swap window has provided further liquidity boost to the banks. We have Buy rating in HDFC Bank, State Bank of India in large caps, and Allahabad Bank & Oriental Bank of Commerce in midcap."

Earlier, Analysts at Chola Securities said, “With repo rate cuts in the pipeline, banks could see a near term spike in NIMs due to reduced borrowing costs and lag in MCLR resets affecting book yields. While the NIMs will return to normal in long run, reduced interest rates could have a positive impact on credit growth, which is already at 14.1% (as on 1st March 2019).”