25 April, 2014 01:35 IST
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`Accumulate` Axis Bk, ICICI Bk and HDFC Bk: SMC Global
Source: IRIS (18-DEC-12)
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India's central bank, the Reserve Bank of India (RBI), in its mid quarter monetary policy review on Tuesday has kept CRR, repo and reverse repo rate unchanged. The market was expecting 25 bps rate cut in CRR to improve liquidity in the banking system.
 
The RBI continued to maintain a status quo on account of uncertainty over inflationary trajectory. However, it reiterated the fact that easing inflation will provide an opportunity to shift focus on growth rather than inflation management. Further, RBI is set to conduct OMOs in order to arrest any liquidity constraints which might come in way for smooth functioning of the financial system.

Vishal Narnolia, SMC Global Securities, said, ``We expect central bank to shift gears in order to focus on growth through monetary easing in January 2012 at the same time keeping a track on inflationary pressure. Currently, we do not foresee a material change in lending or deposit rates. However, we anticipate a material decline in interest rates in 4QFY13 with RBI shooting its first bullet to cut down rates which will provide some comfort to corporate facing high financial expense. Banks will also breathe a sigh of relief as further deterioration in asset quality will be toned down. Keeping in mind, lower interest rate regime likely to hit the system, we recommend accumulating banks with prudent asset quality and high retail base including Axis Bank, ICICI Bank and HDFC Bank."

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