Investors joined industry groups, fund managers and bankers in hailing the RBI’s growth-supporting monetary policy on Wednesday with a rally in bank stocks lifting the benchmark S&P BSE Sensex.
The 30-stock Sensex jumped 460.37 points, or 0.94%, to close at 49,661.76. Banks led the gains, with the State Bank of India climbing 2.25% and ICICI Bank advancing 2.05%.
“The momentum [in the market] accelerated after the RBI monetary policy, as many banking outlets started to rebound strongly, ”said Sameet Chavan, chief analyst, technical and derivatives, Angel Broking. “The upward movement was mainly driven by the banking space,” he added.
“RBI’s policy statement is a clear commitment to allay uncertainties in the market through guaranteed and ongoing liquidity support and explicit guidance for navigating through the current COVID outbreak, the duration of which is uncertain,” said SBI Chairman Dinesh Khara. “Allowing banks to co-lend through NBFCs and subject them to PSL guidelines will result in broad-based lending,” he added.
The RBI stressed on Wednesday that as part of maintaining its accommodative policy, it will stick to its commitment to ensure sufficient liquidity in the system. As part of its liquidity measures, it said it is implementing a secondary market G-sec acquisition program or G-SAP 1.0.
“The Indian market is invigorated by RBI’s long-term accommodative stance until the economy returns to normal,” said Vinod Nair, director of research, Geojit Financial Services. “A big thumbs up is G-Sec’s 1 lakh crore buying program to ensure liquidity and flatten the long-term yield curve. RBI’s decision to maintain its forecast for high GDP growth has also helped calm the market in the face of fears about the second wave of infections, ”he added.
“Faced with multiple challenges, the main one being the uncertainty stemming from the second wave and the rise of inflationary risks, the RBI has done well to maintain the key rates while continuing its accommodative stance,” said Chandrajit Banerjee, Managing Director General of the CII.
Help reduce the term premium
Commenting on G-Sec’s acquisition program in the secondary market, Sampath Reddy, CIO, Bajaj Allianz Life Insurance said: “This indicates an intention to [RBI’s] G-sec buys and will help manage the yield curve and may also help reduce the term premium. “
AK Das, Managing Director and CEO of Bank of India, said the announcement of the policy represented a balanced approach to deeply entrench economic recovery, ensure orderly development of financial markets and keep price movements at manageable levels.