Financials gain post RBI policy; LIC Housing, Can Fin Homes up over 6%

Financial sector stocks including banks, non-banking financial companies (NBFCs) and housing finance companies (HFCs) gained ground at the bourses after the Reserve Bank of India (RBI) announced liquidity boositing measures while keeping the key rates unchanged.

In 2018, the RBI put in place a framework for co-origination of loans by banks and a category of Non Banking Financial Companies (NBFCs) for lending to the priority sector, subject to certain conditions. In Friday's policy, the central bank decided to extend the scheme to all NBFCs, including HFCs, in respect of all eligible priority sector loans, and allow greater operational flexibility to the lending institutions.

That apart, in recognition of the role of the real estate sector in generating employment and economic activity, the RBI has decided to rationalise the risk weights applicable to individual housing loans, based on the size of the loan as well as the loan-to-value ratio (LTV), and link them to LTV ratios only for all new housing loans sanctioned up to March 31, 2022. The measure, according to the central bank, is expected to give a fillip to the real estate sector.

"Rationalisation of risk weights on Individual housing loans, now linked only to LTVs, for all new HL sanctioned till March 2022, is a positive for banks," said Amar Ambani, senior president & institutional research head at Yes Securities.

Key rates unchanged

The RBI’s Monetary Policy Committee on Friday voted to keep key rates unchanged and maintained an accommodative stance, announced Governor Shaktikanta Das. With this repo rate stays at 4.0 per cent while reverse repo rate stays at 3.35 per cent. The development comes amid signs of recovery in the economy badly battered by the coronavirus pandemic.

At 10:47 am; Nifty Financial Services, Nifty Bank, Nifty Private Bank and Nifty PSU Bank index were up between 1 per cent and 1.5 per cent on the National Stock Exchange (NSE). In comparison, the Nifty50 index was up 0.38 per cent at 11,880 points.

LIC Housing Finance, Mahindra & Mahindra Financial Services, Indiabulls Housing Finance, PNB Housing Finance, Housing Development Finance Corporation (HDFC) and Repo Home Finance were up 4 per cent to 9 per cent in intra-day trade today. Bandhan Bank, ICICI Bank, AU Small Finance Bank, Bajaj Finance and HDFC Bank were up in the range of 2 per cent to 3 per cent.

“Market participants should be assured that in keeping with the monetary policy stance announced today, the RBI will maintain comfortable liquidity conditions and will conduct market operations in the form of outright and special open market operations. In response to feedback from market participants, the size of these auctions will be increased to Rs 20,000 crore. It is expected that the market participants will respond positively to this initiative,” said Shaktikanta Das in statement.

To provide impetus towards reviving the economy, certain additional measures are being announced today by RBI. These measures are intended to enhance liquidity support for financial markets; regulatory support to improve the flow of credit to specific sectors within the ambit of the norms for credit discipline; provide a boost to exports; and deepen financial inclusion and facilitate ease of doing business by upgrading payment system services. CLICK HERE TO READ FULL POLICY