Sharesof fourteen banks gained 0.05% to 6.23% at 12:21 IST on BSE on speculation the central bank will keep key policy rates unchanged at its quarterly monetary policy review next week.
The Bankex was up 1.07% at 10,671.49. It outperformed the Sensex, which was up 0.41% at 17,396.54
Union Bank of India (up 0.42%), Canara Bank (up 0.36%), Punjab National Bank (up 0.05%), Allahabad Bank (up 1.33%), State Bank of India (up 0.82%), Indian Overseas Bank (up 2.42%), Karnataka Bank (up 5.30%), Federal Bank (up 3.71%), Yes bank (up 6.23%), ICICI Bank (up 1.22%), Bank of Baroda (up 0.31%), Axis Bank (up 0.68%), HDFC Bank (up 0.17%), and Kotak Mahindra Bank (up 0.68%), rose.
The Bankex had outperformed the market over the past one month till 17 October 2009, rising 11.91% as compared to the Sensex's 3.68% rise. It had also outperformed the market in the past one quarter, surging 29.85% as compared to the Sensex's return of 17.50%.
As per reports, the Reserve Bank of India (RBI) will keep the benchmark lending and borrowing rates unchanged at a quarterly policy review on 27 October 2009 with a view to boost growth in the economy. A soft monetary policy may help boost lending growth which currently remains sluggish.
At present, the cash reserve ratio (CRR) stands at 5%, while the repo rate (the rate at which banks borrow from RBI) is at 4.75% and reverse repo (the rate at which RBI borrows money from banks) stands at 3%.
Earlier, the RBI cut the repo rate by 425 basis points between October 2008 and April 2009 to revive economy amid the global economic meltdown. It also slashed the CRR by 400 basis points from 9% between October 2009 and January 2009.
However, in its first quarter review of monetary policy on 28 June 2009, the apex bank had refrained from changing any key rates even as it raised the inflation forecast for the end of this fiscal to 5% from 4% earlier. The RBI said prices could rise because of a rebound in global commodity prices and the poor monsoon.
The Reserve Bank of India (RBI) governor D Subbarao on 15 September 2009 said the central bank will not unwind its accommodative monetary policy until the economy is back on high-growth track.
India's economy grew 6.7% in 2008-09 (April-March), its slowest in six years, after growing at or above 9% in the previous three years.
However economists expect the RBI to exit its accommodative monetary policy gradually, beginning in early 2010 since the inflation is also expected to rise gradually.
ICICI Bank will announce its Q2 September 2009 results on 30 October 2009. Kotak Mahindra Bank will unveil Q2 results on 27 October 2009.