Indian banks may turn the Reserve Bank of India’s latest rate hike into an earnings tailwind, with larger private lenders and state-run banks better placed than non-bank lenders, according to Jefferies. The brokerage said RBI’s 25-basis-point hike in the repo rate to 5.5% was in line with expectations, but the shift in policy stance to “calibrated tightening” was the bigger signal for financial stocks. Jefferies’ preferred names among large-cap banks are ICICI Bank, SBI and Axis Bank.
The change has raised Jefferies’ rate-hike expectation to 75-100 basis points from 50 basis points earlier. It said this could become a positive catalyst for earnings of large private banks, PSU banks and housing finance companies, while posing a mild risk to smaller private banks, NBFCs and life insurers.
