Bank Nifty rises for 2nd day, reclaims 55,000: Here's what investors should expect ahead of RBI rate decision

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Bank Nifty index rose for second day on October 6 and reclaimed 55,000-mark, led by Kotak Mahindra Bank and Axis Bank, which rose 4% and 2.3%, respectively.

At 2:25 pm on October 6, Bank Nifty was trading 0.7% higher at 55,089.25 with IndusInd Bank, HDFC Bank being the other gainers.

The Nifty Private Bank index was trading 1.5% higher.

"Going ahead, a follow through up move above Monday’s high of 55,200 will signal extension of the pullback towards 55,600 and 56,000 levels in the coming sessions being the recent breakdown area. Failure to move above Thursday’s high will signal some consolidation in the range of 53,500-55,200 levels in the coming sessions ahead of the RBI monetary policy outcome during next week.

"Index has key short-term support at 53,500-53,000 being the confluence of the previous major lows and measuring implication of the recent range breakdown (58,500-56,000)," said Pabitro Mukherjee, Deputy Vice President-Research, Bajaj Broking.

A cautious stance is advisable ahead of the Reserve Bank of India policy, said Vatsal Bhuva, Technical Analyst at LKP Securities.

Resistance is placed at 55,000–55,200, while immediate support lies at 54,300 and 54,000, he said.

"The Indian bond market is pricing in a repo rate hike of 25 basis points and a temporary CRR hike of 50 basis points in the monetary policy announcement on 7th October 2026. The bond market has already factored in a 100 basis points of rate hikes in the current cycle. If the RBI Governor is not hawkish in his comments, the debt market may stabilise at current levels and trade in the band of 7.15% to 7.25% range," said Murthy Nagarajan, Head-Fixed Income, Tata Asset Management.

"We expect RBI to raise the policy repo rate by 25 bps and also change the monetary policy stance. Though the market has a consensus view on a 25 bps rate hike, its split on a change in stance and we believe that given the worsening global macro, narrowing of interest rate differentials with rest of the world, increasing probability of higher inflation going ahead, it will be not of way to change the monetary stance along with the start of the rate hiking cycle," said Puneet Pal, Head- Fixed Income, PGIM India Mutual Fund.

"A sustained rally in the market will require sharp dip in crude prices. But there is no clarity on this front. This uncertainty will weigh on the central bank when the RBI Governor announces the MPC policy decision tomorrow. A 25 bp rate hike appears inevitable in the context of rising inflationary expectations and the rising bond yields in most of the developed world. A rate hike is already discounted by the market and, therefore, the focus of the market participants would be on the policy stance and the RBI’s estimates on growth and inflation.

"From the investors’ perspective it is important to understand that a rate hike would be beneficial for the banks whose margins will improve from rising floating rates. The strong deposit and credit growth in the economy indicate good prospects for the financial sector," said V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

Kotak Mahindra Bank rises 4%

Kotak Mahindra Bank rose more than 4% to an intraday high of Rs 434.40 apiece after the bank reported that its net advances as of September 30 rose nearly 25% on year and 13% sequentially to Rs 5.77 lakh crore. Its total deposits were up 23% on year at Rs 6.51 lakh crore, while its current account savings account gained over 11% on year to Rs 2.49 lakh crore. The stock of the lender was among the key index movers.

Post this, Goldman Sachs raised its target price on the stock to Rs 540 from Rs 509, and retained a 'buy' recommendation. The target price is nearly 30% higher than the stock's closing price Monday. The brokerage highlighted the bank's strong 19% on-year organic loan growth and strong mobilisation of foreign currency non-resident (banks) deposits. Strong deposit growth was also highlighted by the brokerage. The brokerage raised the bank's earnings estimates based on these factors, according to an NDTV Profit report.

Citi also retained its "buy" call on the stock with a target price of Rs 465 on account of the growth in advances. The brokerage said the growth was supported by continued strength in corporate banking, small and medium enterprises, loan against property, and microfinance institute segments. Foreign currency non-resident (banks) deposits also added to the lender's growth.

Kotak Mahindra Bank has outperformed the Nifty 50 and Bank Nifty over the last two months because of a combination of stronger growth, leadership clarity and expectations of a favourable rate cycle, said Abhinav Tiwari, Sr. Research Analyst at Bonanza.