Though additional borrowings of Rs 46,000 crore by the government have made the interest rate scenario slightly tough for the banking regulator,the markets are anticipating a repo rate reduction in the coming days.
Analysts are now expecting the central bank to cut key rates by up to 50 basis points around the governments interim budget on Monday or in the coming days.
Investors were bullish on bank stocks,betting on a rate cut next week that would boost treasury income and boost demand. ICICI Bank (up 6.7%),State Bank of India (up 6.8%),HDFC Bank (up 5.2%) and Axis Bank (up 9.1%) galloped. The BSE Bankex rose 5.48% in the bygone week. Key Indian indices rose on expectations that the forthcoming interim budget will contain fiscal incentives to revive sagging growth after official estimates showed the economy expanded at its slowest pace in six years. The BSE Sensex rose 334 points or 3.59% to 9,634.74 during the week ended February 13,2009. On the other hand,overnight indexed swap rates eased on Friday,falling to fresh two-week lows on growing rate cut expectations.