FPIs pare bank Nifty shorts ahead of RBI policy
AI Summary
The anticipated rate hike by the RBI could bolster bank stocks, particularly if it aligns with market expectations. Retail investors should consider the potential for a short-term rally in the banking sector, driven by improved credit growth and the unwinding of bearish positions. However, caution is warranted as unexpected outcomes from the MPC meeting or geopolitical tensions could reverse these gains.
Mumbai: Foreign investors are scaling back their bearish bets on banking stocks ahead of the Reserve Bank of India's (RBI) policy decision on Wednesday, raising the prospect of further gains in the Bank Nifty if the central bank delivers an expected rate hike without any negative surprise.The RBI's rate-setting committee is widely expected to raise the repo rate — at which it lends to banks — by 25 basis points to 5.50% on Wednesday, the first such increase in more than three and a half years, while holding its neutral policy stance. Markets have largely priced in both the rate increase and an unchanged stance, with investors now looking for signs that could support a further rally, experts said.
After net selling incremental Bank Nifty active futures contracts worth ₹1,980 crore between 7 September, when the latest futures began trading on the National Stock Exchange (NSE), and 25 September, FPIs bought back or covered ₹906 crore worth of shorts over the following five sessions through Monday, according to NSE data.
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