 "Banking shares gain; ICICI Bank up 3%")
Banking shares are trading higher on expectation that the Reserve Bank of India (RBI) may soon announce a reduction in key policy rate. The central bank's monetary policy review is scheduled for April 5, 2016.
The US Federal Reserve kept its key interest rates unchanged on Wednesday, and downgraded its forecast for number of rate increases to 2 in 2016 from the earlier projected 4.
ICICI Bank, Punjab National Bank, Bank of Baroda, Federal Bank, State Bank of India, Yes Bank and Canara Bank are up more than 1% each on the National Stock Exchange (NSE).
At 09:33 AM, the Nifty Bank index was up 1.3% as compared to 0.99% rise in Nifty 50 index.
In past four trading sessions, the banking index gained 3.2% after the consumer price index-based (CPI-based) inflation softened to 5.18% in February from 5.69% a month ago, according to data released by the Central Statistics Office on Monday. The benchmark index was up less than 1% during the same period.
This positive surprise further lends support to industry’s demand for a rate cut, post the recent moderation in the Index of Industrial Production (IIP) and government’s decision to stick to fiscal targets in Budget FY17, said Religare Institutional Research in client note.
While the RBI may cut policy rates in the April policy, the room for monetary easing is limited by upside risks to food inflation and large second-round effects of sustained high food inflation on core inflation in India, added note.
Among the individual stocks, ICICI Bank rallied 4.4% to Rs 236 on the NSE in intra-day trade. According to Moody's Investor services, ICICI Bank has seen significant improvement in its core operating profitability, allowing ICICI to absorb a higher level of credit costs.
"By contrast, ICICI's asset quality has deteriorated over the last few quarters, and the bank's corporate loans will remain under pressure, because some of its corporate customers show weak debt servicing metrics," says Srikanth Vadlamani, a Moody's Vice President and Senior Credit Officer.
The US Federal Reserve kept its key interest rates unchanged on Wednesday, and downgraded its forecast for number of rate increases to 2 in 2016 from the earlier projected 4.
ICICI Bank, Punjab National Bank, Bank of Baroda, Federal Bank, State Bank of India, Yes Bank and Canara Bank are up more than 1% each on the National Stock Exchange (NSE).
At 09:33 AM, the Nifty Bank index was up 1.3% as compared to 0.99% rise in Nifty 50 index.
In past four trading sessions, the banking index gained 3.2% after the consumer price index-based (CPI-based) inflation softened to 5.18% in February from 5.69% a month ago, according to data released by the Central Statistics Office on Monday. The benchmark index was up less than 1% during the same period.
This positive surprise further lends support to industry’s demand for a rate cut, post the recent moderation in the Index of Industrial Production (IIP) and government’s decision to stick to fiscal targets in Budget FY17, said Religare Institutional Research in client note.
While the RBI may cut policy rates in the April policy, the room for monetary easing is limited by upside risks to food inflation and large second-round effects of sustained high food inflation on core inflation in India, added note.
Among the individual stocks, ICICI Bank rallied 4.4% to Rs 236 on the NSE in intra-day trade. According to Moody's Investor services, ICICI Bank has seen significant improvement in its core operating profitability, allowing ICICI to absorb a higher level of credit costs.
"By contrast, ICICI's asset quality has deteriorated over the last few quarters, and the bank's corporate loans will remain under pressure, because some of its corporate customers show weak debt servicing metrics," says Srikanth Vadlamani, a Moody's Vice President and Senior Credit Officer.