Banks, softer oil boost Indian shares; RBI eases rate concerns

Indian shares advanced on Wednesday, on a slide in crude oil prices and easing domestic interest-rate-hike concerns, while heavyweight banks gained after the central bank allowed loans against foreign-currency deposits.

Brent crude futures slid to their lowest since February 27, a day before the Iran war started, on signs that stranded oil tankers were set to move out of the Strait of Hormuz.

Reserve Bank of India Governor Sanjay Malhotra told ET Now that it was premature to discuss rate hikes, as the central bank did not yet see signs of inflation becoming broad-based.

Lower-for-longer borrowing costs could support corporate earnings, consumption and equity valuations.

The Nifty 50 rose 0.83% to 24,021.65, while the Sensex added 1.04% to 76,991.22.

“The slide in crude has powered market gains as they have brightened the outlook for both the economy and markets after a challenging spell,” said Aishvarya Dadheech, founder and chief investment officer at Fident Asset Management.

“Add to that the central bank’s measures, including Tuesday’s clarification to boost foreign inflows and support the rupee and banks, have found fresh buying interest as these steps could aid deposit and credit growth.”

Banks and private lenders rose about 1.7% and 1.9%, respectively, after the RBI clarified that banks can lend to non-resident Indians against foreign-currency deposits, improving funding flexibility.

Index heavyweights HDFC Bank and ICICI Bank climbed about 2.5% and 2.6%, respectively, while State Bank of India rose 1%.

Eleven of the 16 major sectors advanced. Broader small-caps and mid-caps gained 0.4% and 0.1%, respectively.

Trent jumped 3.3% after HSBC raised its price target, while textile stocks surged after Motilal Oswal initiated coverage and projected export-led earnings growth.

Domestic benchmarks have gained about 4% each over the nine sessions since the U.S. and Iran agreed on a preliminary peace deal. Crude prices declined 16.6% during the same period.

With crude prices easing, the monsoon is now the key near-term monitorable for markets, given its implications for consumption and inflation, two analysts said.

Monsoon rainfall is running about 43% below average so far, raising risks of the weakest rains in 11 years.