On February 7, the Reserve Bank of India (RBI) made a big move to help banks and finance companies by adding Rs 1.5 lakh crore (which is a huge amount of money) into the banking system. This news made bank stocks go up, with HDFC Bank, AU Small Finance Bank, and IDFC First Bank each rising about 3%. Other banks like IndusInd Bank and ICICI Bank saw increases of around 2%.
For non-banking financial companies (NBFCs), Cholamandalam Investment’s shares jumped by 3.5%, and Bajaj Finance went up by 2%. The RBI plans to put more money into the banking system through special auctions, making it easier for banks to lend money. Recently, banks have been struggling with a shortage of cash, but these new actions will help put more money back in, which is good for both banks and loan companies.
Experts believe this will help banks keep lending money and keep their profits healthy. However, they say that the banking system still needs to balance out its money situation for everyone to grow fully again.
According to Nomura, banks like Axis Bank and HDFC Bank will benefit most from this move. Shriram Finance is recommended as one of the top picks among NBFCs, alongside Bajaj Finance and SBI Card. Mid-sized banks like IndusInd Bank and AU Small Finance Bank are likely to see some improvements, though they still need to address issues with loan quality.
There is also a lot of talk about whether the RBI will lower interest rates. Morgan Stanley thinks a small cut might happen because the economy’s current state calls for it. But SBI Mutual Fund believes we should wait for clearer signals before expecting any changes. They think this will be a close call and depend on how things develop in the economy.
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