 "Banking stocks lift Sensex 716 pts, Nifty 225 as markets snap losing run")
Indian equity benchmarks on Wednesday snapped an eight-day losing streak, led by gains in banking stocks as the Reserve Bank of India (RBI) unveiled a slew of measures to improve credit flow in its monetary policy announcement.
The Sensex ended the session at 80,983, up 716 points, or 0.9 per cent. The Nifty50, meanwhile, closed at 24,836, 225 points, or 0.9 per cent higher.
Over the previous eight sessions, the Sensex has declined 3.3 per cent and the Nifty by 3.2 per cent. The combined market capitalisation of BSE-listed firms rose by ₹3.9 trillion to ₹453.5 trillion.
The RBI kept its benchmark rates on hold for the second consecutive time on Wednesday. The central bank also announced 22 additional measures to strengthen the banking sector and improve credit flow.
It proposed removing the regulatory ceiling on lending against listed debt securities. Moreover, it increased the lending limits against shares from ₹20 lakh to ₹1 crore and for IPO financing from ₹10 lakh to ₹25 lakh per person. An enabling framework for Indian banks to finance acquisitions by Indian corporates was also proposed.
The Nifty Bank rose 1.3 per cent, the biggest one-day gain in nearly four months. Fifteen of the 16 major sectoral indices ended with gains.
"With capital markets witnessing significant participation from retail investors, and an equity cult gaining traction for sustainable wealth creation for younger generations, the move to enhance limits for lending by banks against shares promises to unlock value for both FIIs as well as participating holders of equities," Soumya Kanti Ghosh, group chief economic advisor of SBI, wrote in a note.
The RBI also proposed to withdraw the framework introduced in 2016, which had disincentivised lending by banks to large borrowers with a credit limit of ₹10,000 crore and above.
"This could boost corporate bank credit. Incremental corporate borrowing, including bonds, CP and ECB, was around ₹30 lakh crore in FY25. If we assume 10-15% may come back to the banking system, it has the potential for banks to lend another ₹3-4.5 lakh crore towards meeting corporate demands, subject to pricing of risks," Ghosh noted.
Market breadth was strong with 2,721 stocks advancing and 1,440 declining. HDFC Bank, which rose 1.5 per cent, contributed the most to Sensex gains, followed by ICICI Bank, which was up 1.7 per cent.
In percentage terms, Tata Motors gained the most, rising 5.6 per cent — its best session in over a year — after it fixed a record date for the demerger of its commercial business and projected a robust growth outlook.
"Gains were led by banking and consumer stocks, while autos advanced on the back of healthy sales. Overall, the rebound reflects improving sentiment and hints at early signs of a potential shift in market direction,' said Vinod Nair, head of research at Geojit Investments.
Going forward investors will be tracking the September quarter results for further cues.