Banking shares trade firm post WPI data

Union Bank, Yes Bank, Axis Bank, IDBI Bank, Canara Bank, Oriental Bank and Indian Overseas are up over 2% each.

Banking shares have moved higher by up to 4% on the National Stock Exchange (NSE) in noon deal trade after better-than-expected the Wholesale Price Index (WPI)-based inflation data.

The WPI inflation contracted sharply for the 10th straight month to -4.95% in the month of August against negative 4.05% in July, add pressure on the Reserve Bank of India (RBI) to cut interest rates again at its policy review later this month to spur economic growth.

Union Bank of India (4% at Rs 172), Yes Bank (3% at Rs 731), Oriental Bank of Commerce (3% at Rs 129), Axis Bank (2.6% at Rs 494), IDBI Bank (2.5% at Rs 57.50), Indian Overseas Bank (2.5% at Rs 34.70) and Canara Bank (2% at Rs 265) are up more than 2% on the NSE.

State Bank of India, ICICI Bank, Kotak Mahindra Bank and Bank of Baroda are up 1%-2% on the NSE.

At 01:28 p.m., the Bank Nifty, the banking index, was up 1.3% or 217 points at 16,830 compared to 0.69% rise in the CNX Nifty.

“The improved IIP and expectations of a further dip in CPI inflation (due Monday) raise hopes of a policy rate cut by the RBI in its Monetary Policy Review on 29 September,” according to Religare Institutional Research.

Although the sharp dip in CPI inflation is transient at best, caused mostly by a favourable base effect that wanes from September onwards, risks to RBI’s 6% Jan’16 inflation target emanate primarily from a poor monsoon via food inflation, given the benign global commodity prices, added report.