Banking shares such as Indusind Bank, State Bank of India, Canara Bank, Punjab National Bank and Bank of Baroda are trading higher by 1.3-3% each in trades today after the Reserve Bank of India hinted at cutting the key policy rates in the upcoming policy review on June 18.
Ahead of its mid-quarterly policy review, the Reserve Bank hinted at cut in interest rates, saying moderation in inflation due to lower economic growth and cooling global oil prices provide room for easing monetary policy.
"The growth is somewhat lower than expectation and that may have positive, moderating impact on core inflation," RBI Deputy Governor Subir Gokarn said here.
"Oil prices have come off somewhat more than expected. Those are the two factors that suggest more room (for easing monetary policy)," he said.
Meanwhile, Nomura expects RBI to cut the repo rate by 25 basis points at its June 18 meeting, joining the growing chorus predicting the RBI will ease policy this month.
Nomura cites "continued weakness" in domestic demand and "moderate" core inflation as key factors behind call.
The BSE banking index- bankex is also trading on a firm note. The index has advanced 1% or 115 points to 10,918 levels. It opened at 10,885 levels and touched the intra-day high of 10,997 in trades so far.