Banking shares extend gain; Bank Nifty surges 5% in two days

ICICI Bank, SBI, Axis Bank, Bank of India and Federal Bank are up 2-6% on the National Stock Exchange.

Banking shares are trading higher by up to 5% on National Stock Exchange (NSE) after the Reserve Bank of India (RBI) released the final guidelines on the eligibility of long-term bonds for financing infra and affordable housing.

ICICI Bank, State Bank of India (SBI), Axis Bank, Bank of India and Federal Bank are up 2-6%, while Kotak Mahindra Bank, YES Bank and Canara Bank up 1% each on NSE.

The NSE banking index Bank Nifty has surged 2.5% at 15,264 points compared to 1.3% rise in CNX Nifty at 1505 hours.

Bank Nifty has outperformed the market by gaining 5.3% from 14,490 in past two trading sessions as against 1.9% rise in benchmark index.

Post market hours on Tuesday, the RBI said that the banks would not have to maintain cash reserve ratio (CRR) or statutory liquidity ratio (SLR) and will not have to meet priority-sector lending targets for funds raised through bonds for extending credit to these sectors.

Under the new definition of affordable housing, loans of up to Rs 50 lakh in metros for houses valuing up to Rs 65 lakh and those of up to Rs 40 lakh for houses valuing up to Rs 50 lakh in all other cities are now part of affordable housing.

"ICICI Bank & Axis Bank among private sector banks and SBI from the public sector will be the biggest beneficiaries as they have large exposure to both project finance and housing loans," analysts at Espirito Santo Securities said in a note.

Among individual stocks, ICICI Bank has rallied 5% to Rs 1,461, extending its Tuesday’s 3.3% gain on NSE. Axis Bank and SBI are up 3% each at Rs 1,961 and Rs 2,581 respectively.