The Bank Nifty on the National Stock Exchange surged over 3 per cent on
Tuesday, a day after the Reserve Bank of India cut overnight lending
rates and announced other measures to boost liquidity.
Banking stocks, which have been under tremendous pressure since the central bank raised repo rate last September, were the biggest gainers today.
Private lenders such as Yes Bank and IndusInd Bank, who have greater reliance on bulk deposits, saw sharp gains. Yes Bank shares traded 9 per cent to Rs 344 as of 09.15 a.m., while IndusInd Bank surged 7.5 per cent to Rs 425.75. The stock was the top gainer on the 50-share Nifty benchmark.
Kotak Mahindra Bank, Axis Bank, ICICI Bank, Bank of Baroda and Punjab National Bank were other prominent gainers on the Nifty.
The RBI cut the marginal standing facility (MSF) rate by 50 basis points to 9 per cent. It also said that it will provide additional liquidity through term repos of 7-day and 14-day tenors for a notified amount equivalent to 0.25 per cent of net demand and time liabilities (NDTL) through variable rate auctions to take place every Friday from 11 October 2013.
These measures will lower the overnight rate further and help ease liquidity conditions, global brokerage Nomura said.
Keki Mistry, VC and CEO of HDFC told NDTV that the move will improve sentiments and more importantly help small and mid-sized companies, who borrow a lot of money from the short term market.
The BSE Sensex jumped 240 points to edge above 20,000 levels, while the Nifty surged 75 points in early trade. (Read: Sensex crosses 20,000, bank stocks on fire)
The RBI had jacked-up the MSF rate by 200 basis points in mid-July, the most dramatic move in a package of measures to defend the rupee, which had made the MSF India's de facto policy rate.
With the rupee stabilising, these emergency measures are being withdrawn. The rupee has strengthened 11.4 per cent to 61.79 per dollar after hitting an all-time low of 68.85 to the dollar on August 28.
In his first monetary policy review last month, new RBI governor Raghuram Rajan cut the MSF rate by 75 basis points even as he unexpectedly raised the policy repo rate by 25 basis points to 7.50 per cent and said he wanted the repo rate to regain its role as the policy rate.
Normally, the MSF rate is 100 basis points higher than the repo rate. Monday's move narrowed the gap to 150 basis points.
Banking stocks, which have been under tremendous pressure since the central bank raised repo rate last September, were the biggest gainers today.
Private lenders such as Yes Bank and IndusInd Bank, who have greater reliance on bulk deposits, saw sharp gains. Yes Bank shares traded 9 per cent to Rs 344 as of 09.15 a.m., while IndusInd Bank surged 7.5 per cent to Rs 425.75. The stock was the top gainer on the 50-share Nifty benchmark.
Kotak Mahindra Bank, Axis Bank, ICICI Bank, Bank of Baroda and Punjab National Bank were other prominent gainers on the Nifty.
The RBI cut the marginal standing facility (MSF) rate by 50 basis points to 9 per cent. It also said that it will provide additional liquidity through term repos of 7-day and 14-day tenors for a notified amount equivalent to 0.25 per cent of net demand and time liabilities (NDTL) through variable rate auctions to take place every Friday from 11 October 2013.
These measures will lower the overnight rate further and help ease liquidity conditions, global brokerage Nomura said.
Keki Mistry, VC and CEO of HDFC told NDTV that the move will improve sentiments and more importantly help small and mid-sized companies, who borrow a lot of money from the short term market.
The BSE Sensex jumped 240 points to edge above 20,000 levels, while the Nifty surged 75 points in early trade. (Read: Sensex crosses 20,000, bank stocks on fire)
The RBI had jacked-up the MSF rate by 200 basis points in mid-July, the most dramatic move in a package of measures to defend the rupee, which had made the MSF India's de facto policy rate.
With the rupee stabilising, these emergency measures are being withdrawn. The rupee has strengthened 11.4 per cent to 61.79 per dollar after hitting an all-time low of 68.85 to the dollar on August 28.
In his first monetary policy review last month, new RBI governor Raghuram Rajan cut the MSF rate by 75 basis points even as he unexpectedly raised the policy repo rate by 25 basis points to 7.50 per cent and said he wanted the repo rate to regain its role as the policy rate.
Normally, the MSF rate is 100 basis points higher than the repo rate. Monday's move narrowed the gap to 150 basis points.