Banking stocks remained firm on Monday after the government on Friday announced a cut in interest rates on small savings schemes such as Public Provident Fund (PPF), National Savings Certificate (NSC) and Kisan Vikas Patras – which will fetch up to 90 basis points lower returns during the April-June quarter.
All 10 shares in BSE Bankex settled the day in green. Public sector lenders, State Bank of India, Punjab National Bank and Bank of Baroda gained 2.93 per cent, 2.55 per cent and 2.19 per cent, respectively.
On the other hand, private sector lenders, ICICI Bank, YES Bank, Axis Bank and HDFC Bank were also closed up by 1.93 per cent, 2.13 per cent, 1.74 per cent and 1.52 per cent, respectively. The BSE Bankex settled 1.70 per cent up at 18,155.36.
The interest rate on PPF scheme will be cut to 8.1 per cent for the period April 1 to June 30, from 8.7 per cent, at present. The rate on senior citizen saving scheme (5 years) has been cut from 9.3 per cent to 8.6 per cent.
According to market experts, this is a very positive step for the banks as the deposit rates by the banks will be reduced accordingly which will ensure a reduction in the lending rate. Angel Broking in a research note said, “We expect nearly 100 basis points cut in the bank’s base rate over FY2017 and this could lead to a positive impact for all the rate sensitive sectors. Our top picks include HDFC Bank from the banking space and LIC Housing Finance from the housing finance space.”
LIC Housing Finance shares closed 1.46 per cent up at 470.30.