Indian banking stocks traded actively on September 29, the opening day of the Reserve Bank of India’s (RBI) bi-monthly policy meeting, sending mixed signals to the market.
HDFC Bank emerged as the top positive contributor to the Nifty 50, adding 24 points. In contrast, ICICI Bank and Axis Bank together pulled the index down by more than 27 points by 3 pm, just a day before the expiry of September futures and options contracts.
Movers and Shakers
IndusInd Bank gained the most among financial stocks, rising 2.68% after Morgan Stanley upgraded it to ‘equal weight’ from ‘underweight.’ The brokerage also set a target price of ₹2,785, almost triple Friday’s closing levels, citing attractive valuations. Meanwhile, Axis Bank became the worst-performing stock on the Nifty 50.
The sectoral indices also told an interesting story. The PSU Bank index topped the gainers’ list, followed by real estate, both considered sensitive to interest rate moves. On the flip side, the auto index emerged as the top loser, reflecting weaker investor sentiment in rate-sensitive sectors.
RBI Outlook in Focus
Markets are now keenly awaiting the RBI’s decision, scheduled for October 1. A CNBC-TV18 poll suggests most economists do not expect a rate cut this time. However, some are anticipating dovish commentary from RBI Governor Sanjay Malhotra, which could provide reassurance to investors.
Global market watchers are also weighing in. Kamaksha Trivedi, Chief FX and Emerging Markets Strategist at Goldman Sachs, said the key question is not “if” but “when” the RBI will cut rates further. Goldman expects one more cut in the current cycle.
Valuation Edge
Despite the uncertainty, analysts remain optimistic about banking valuations. Pratik Gupta, CEO and Co-Head at Kotak Institutional Equities, pointed out that the price-to-book ratio of Nifty Bank has slipped to a five-month low. He continues to recommend large-cap private and PSU banks, arguing that current levels offer a favorable entry point.
Still, challenges persist. While GST cuts may lift consumption, banks remain constrained by weak capital expenditure trends. Analysts caution that lower GST alone will not resolve the sector’s broader structural issues.
