Indian banking stocks maintained a steady upward trajectory on Wednesday, extending a pre-policy rally as a geopolitical "risk-on" shift outweighed the Reserve Bank of India’s (RBI) widely anticipated decision to hold interest rates steady.
The banking sector didn't wait for the RBI's 10:00 AM address to start its climb. Markets opened with a strong gap-up as news of a two-week US-Iran ceasefire hit terminals, prompting a sharp reversal in the massive foreign institutional investor (FII) outflows seen in March—which totaled over ₹1.12 trillion.
The private sector banks spearheaded the morning's momentum, with internal metrics showing a clear preference for lenders with lower exposure to volatile energy portfolios.
Public sector banks saw a more muted reaction. The State Bank of India (SBI) traded marginally lower, down 0.46% at ₹1,028.00, while Punjab National Bank (PNB) lagged with a 1.80% decline to ₹104.58 as investors rotated capital toward private credit growth.
While the RBI revised its CPI inflation projection to 4.5% for H1 FY27, citing the exogenous shock of the month-long war, the market focused on the immediate relief in energy costs. With oil prices sliding back toward the $100-per-barrel mark, the potential imported inflation tax on India's economy has lightened.
Governor Malhotra emphasized that the Indian economy's 7.1% GDP growth projection remains intact, a figure that continues to make the banking sector an attractive value play for FIIs looking to return to emerging markets.
