Bank Nifty hits all-time high of 57,000: What's fueling rally?
What's the story
The Bank Nifty index in India has hit a record high, passing the 57,000 mark for the first time ever. The surge is mainly due to the Reserve Bank of India's (RBI) unexpected decision to cut the repo rate by 50 basis points and reduce the Cash Reserve Ratio (CRR). Both public sector undertakings (PSUs) and private sector bankers have seen significant gains.
Rate reduction
RBI reduces key lending rate
On June 6, the RBI's Monetary Policy Committee (MPC) reduced the key lending rate by 50 basis points, exceeding market expectations. This comes after a 25 basis points cut in April, which brought the repo rate down to 5.5%. The latest adjustment is the second consecutive reduction in the key lending rate.
CRR adjustment
CRR adjustment details
Along with the repo rate cut, the RBI also declared a phased reduction of the CRR by 100 basis points. The adjustment will be completed in four tranches of 25 basis points each, starting from September 6 and then continuing on October 4, November 1, and November 29 this year.
Market response
Bank Nifty surges
At 12:30pm, the Bank Nifty index was trading at 56,942.90, up 0.64% or 360 points from its previous close. The index slightly retreated from the landmark 57,000 level it had crossed earlier in the day. Kotak Mahindra Bank, Canara Bank and IDFC First Bank were among the top gainers on this banking index with their shares rising by up to 2.5%.
Index performance
Nifty Private Bank index rises
Meanwhile, the Nifty Private Bank index rose 1.16% to 28,155.55 with RBL Bank, Kotak Mahindra Bank and Bandhan Bank leading the charge. The Nifty PSU Bank index was the sector's top gainer, climbing up to 1.2%. UCO Bank, Bank of Maharashtra, and Indian Overseas Bank reported maximum gains in trade with their shares soaring by up to 4%.