Shriram Finance and Cholamandalam Investment were among the BFSI stocks that jumped up to 6 percent on Tuesday amid anticipation of a 25 basis point rate cut by the RBI on April 9, with the current repo rate at 6.25 percent. The Reserve Bank of India kicked off its three-day bi-monthly monetary policy meeting on Monday amid expectations that the focus will shift from inflation to promoting growth, as noted by a report from CareEdge and a Moneycontrol poll of various experts. A 25 bps rate reduction is expected to lower borrowing costs for banks and NBFCs, which should benefit consumers through lower lending rates.
The Nifty Financial Services index closed 1.6 percent higher after surging over 2 percent during the session on optimism of increased credit demand following consecutive rate cuts—the second since the one implemented in February last year. All 20 stocks in the index ended positively, with most reaching or approaching their daily highs. Cholamandalam Investment and Finance Company led the gains with a 6 percent rise to Rs 1,469.5 per share, followed closely by Jio Financial Services at up 5.61 percent, while Shriram Finance, SBI Cards and Payment Services, LIC Housing Finance, and ICICI Prudential Life Insurance Company were up between 4 and 5 percent. Heavyweights like State Bank of India, ICICI Bank, and HDFC Bank saw more modest increases, with rises of 3 percent, nearly 1 percent, and 0.7 percent respectively.
This anticipated cut follows a similar move in February—the first rate cut in five years—after a long period during which the RBI had maintained its policy rate unchanged for 11 consecutive meetings following earlier hikes totaling 250 bps from May 2022 to February 2023.
