Dovish stance, SLR cut fire up bank stocks

MUMBAI: The NSE Bank index soared to a new lifetime high on Wednesday as a section of the market perceived the Reserve Bank of India’s (RBI) post-policy commentary as ‘dovish’.

The central bank’s decision to cut statutory liquidity ratio (SLR) — the amount of money banks need to invest in government securities — by 50 basis points also boosted sentiment especially in shares of state-owned lenders with the Nifty PSU Bank Index gaining 1.2 per cent.

Fund managers and analysts said the SLR cut would boost liquidity. “The status quo was broadly in line with the expectations but the language definitely seemed more dovish and the inflation trajectory projection gives some optimism that there could be a possibility of a rate cut going forward,” said Harsha Upadhyaya, chief investment officer, equity, Kotak Mutual Fund.

The RBI has cut consumer inflation expectations to 2.0-3.5 per cent in H1FY18 from 4.5 per cent, and to 3.5-4.5 per cent in H2FY18 from 5 per cent.

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