Bank Nifty witnessed a sharp rise on Friday, December 6 after the Reserve Bank of India Governor announced a cut in the cash reserve ratio (CRR) in the monetary policy statement. After initially falling following the RBI’s decision to keep the repo rate at 6.5 per cent, the banking index rose sharply after the central bank decided to cut the cash reserve ratio (CRR) by 50 basis points to 4 per cent.
Around 10:30 am, Bank Nifty was trading 0.5 per cent higher at 53,850, 600 points above its intraday low. Before the monetary policy announcement, analysts had estimated that the CRR cut would infuse Rs 1-1.25 lakh crore of liquidity into the banking system, thereby adding to liquidity to support credit growth.
There was a mixed trend in banking stocks after RBI policy
Among banking stocks, Axis Bank was the biggest gainer, rising 1.5 per cent to ₹1,185. SBI and ICICI Bank also contributed to the gains, trading 0.9 per cent and 0.8 per cent higher at ₹873 and ₹1,344, respectively.
Meanwhile, flat business is being seen in HDFC Bank and Kotak Mahindra Bank. HDFC Bank shares were around ₹1,863 and Kotak Mahindra Bank shares were at Rs. Trading is taking place around 1,776.
Market reaction on RBI policy
The RBI’s decision to keep the repo rate steady was largely in line with market expectations, although it initially led to a decline in banking stocks. However, investor sentiment improved again with the announcement of CRR cut. Nifty and Sensex were also slightly positive. The reduction in CRR is expected to increase liquidity in the banking sector and support economic recovery.
