Following an assessment of current liquidity and financial conditions, the Reserve Bank of India (RBI) announced measures to pump liquidity into the banking sector, which caused bank stocks to soar as high as 3.3% on Tuesday, January 28.
The shares of AU Small Finance Bank rose 3% to Rs 580.85 on the BSE after Canara Bank’s shares jumped 3.3%. Early trading saw a 3% surge in PNB shares.
Bank of Baroda shares increased 2.5%, while IDFC First Bank shares increased 2.85% to reach their day’s high of Rs 58.38. Axis Bank’s stock increased by 2%, and ICICI Bank’s stock increased by 1.77%.
The stock of the State Bank of India experienced a slight increase of 1%, while shares of HDFC Bank and IndusInd Bank increased by 1.72% and 1.6%, respectively.
Conversely, Federal Bank had a notable 6.2% loss in shares due to its poor Q3 earnings, while Kotak Mahindra Bank saw a 0.5% decline. Additionally, intraday trading saw a 1.2% increase in the Nifty Bank index.
The Central Bank of India declared the Following Actions:
- On January 30, 2025, February 13, 2025, and February 20, 2025, OMO would purchase Government of India securities at auction for Rs 60,000 crore in three tranches of ₹20,000 crore each.
- On February 7, 2025, a 56-day Variable Rate Repo (VRR) auction for a specified sum of ₹50,000 crore would occur.
- On January 31, 2025, there will be a USD 5 billion USD/INR purchase/Sell Swap auction with a six-month duration.
According to the RBI, it monitors changing market and liquidity situations and takes appropriate action to maintain stable liquidity conditions. Yields on the 10-year benchmark government securities are anticipated to decrease by nearly 6.60% on Tuesday in response to the RBI’s announcement. Expectations of a possible rate cut ahead of the monetary policy meeting on February 7 caused rates on the 10-year benchmark government bond to fall to an intraday low of 6.64% on Monday, almost three years below its current level.
Compared to its closing of 6.72%, the 10-year benchmark yield fell four basis points to 6.68% by market close. To ensure that rate transmission is successful in the event of a rate drop, traders viewed the RBI’s decision to purchase bonds directly from banks as an apparent attempt to inject long-term liquidity into the system before monetary policy. “We are seeing multiple measures in quick succession, so the signaling has changed,” a bond dealer said.
