Bank stocks in focus: Nifty Bank jumps 1% ahead of RBI policy decision tomorrow; CLSA gives Buy call on these counters

Bank stocks are on roll during Thursday’s session as the 12-share Nifty Bank jumped by over 1 per cent to 38,243 levels in the early morning trade. All stocks in Nifty Bank traded in the green, aiding most to the overall markets today.

Heavyweights such as IndusInd Bank, Axis Bank, and State Bank of India surged between 1-2 per cent, while Au Small Finance Bank, and Bank of Baroda were among the top gainers on Nifty Bank, jumping over 2 per cent each in the early morning trade today.

Stocks like Bandhan Bank, ICICI Bank, HDFC Bank, Kotak Bank, IDFC First Bank, PNB, and Federal Bank also gained between 0.5-2 per cent on the Nifty Bank index minutes after the market open today.

The Reserve Bank of India’s (RBI) monetary policy committee meeting is currently underway, and the central bank will come out its decision on Friday, September 30, 2022. The central bank so far has increased 140 basis points in the key rate since May.

Vinod Nair, Head of Research at Geojit Financial Services said that the RBI is again likely to raise repo rates by 35-50 basis points in the upcoming meeting. He, however, noted that the inflation outlook may soften in reaction to declining commodity prices.

While  Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said that the MPC is likely to raise rates by 50 bps and may move to a neutral stance. But this is already discounted by the market and therefore will not have any market-moving impact, he added.

Global brokerage firm CLSA in its report on Banking stocks said, “Risk to earnings limited and the valuations are reasonable. The outlook is favourable from the Indian banking sector with benign asset quality and improving loan growth as well as margin.”

It added that the rising rates might impact growth from the high levels of currency and expects the margin to inch up by 10-20 basis points over 2-3 quarters as a risk to asset quality is low.

CLSA gives a Buy call on Axis Bank, ICICI Bank, SBI, BoB and PNB for target of Rs 1050, Rs 1010, Rs 680, Rs 145 and Rs 40 per share, respectively.