RBI opens Rs 1.5 lakh crore liquidity floodgates. Which bank stocks to buy?
RBI) infused Rs 1.5 lakh crore worth of liquidity into the banking system, sparking a rally in stocks of banks and NBFCs.
Shares of HDFC Bank, AU Small Finance Bank, and IDFC First Bank surged around 3% each, while IndusInd Bank and ICICI Bank also rose by about 2%.
Among NBFCs, Cholamandalam Investment was up 3.5%, while Bajaj Finance gained around 2%. The rally was driven by RBI's announcement that it would inject liquidity into the system through OMO purchase auctions of G-Secs, VRR auctions, and currency swap auctions.
The step comes as a big relief for the financial sector as banking system liquidity was running at a deficit of Rs 3.1 lakh crore, which works out to about 1.5% of system deposits.
«Starting with the CRR cut announced in the last review, the daily VRR auctions announced a couple of weeks ago and the screen-based OMO purchase conducted over the last 2 weeks, the incremental measures announced provide confidence in returning normalcy to the money markets. These incremental actions would add about Rs. 1 trillion of core liquidity infusion and another Rs. 50,000 crores through a slightly longer-term repo auction crossing the quarter,» Rajeev Radhakrishnan, CIO – Fixed Income, SBI Mutual Fund, said.
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