Canara Bank, HDFC Bank to SBI: Bank stocks gain up to 2% on hopes of RBI rate cuts post inflation data

Stock market today: Indian banking stocks opened higher in Wednesday's trading session, April 16, extending their winning streak to the third consecutive day, after India’s retail inflation eased to a multi-year low. This boosted investor sentiment on expectations of another rate cut by the Reserve Bank of India (RBI), which has trimmed the benchmark repo rate to 6% from 6.5% with two consecutive cuts of 25 basis points in recent monetary policy meetings.

Against this backdrop, the Nifty Bank index rose 0.70% to touch an intraday high of 52,749 points. Among individual stocks, Federal Bank, Bank of Baroda, Canara Bank, and Punjab National Bank surged up to 2%. Large-cap bank stocks such as Kotak Mahindra Bank, Axis Bank, IndusInd Bank, and State Bank of India also gained more than 0.5% during the session.

Analysts now project a pickup in credit growth within the financial system, driven by back-to-back RBI rate cuts and the increase in the income tax exemption limit to ₹12 lakh in the Union Budget 2025–26.

Domestic rating agency Crisil on Tuesday estimated that bank credit growth will accelerate to up to 13% in FY26 from 11% in FY25. This growth is expected to be supported by recent regulatory measures, a boost to consumption from tax cuts, and a softer interest rate environment.

However, the agency cautioned that deposit growth "bears watching." It also noted that ongoing global tariff wars could make companies more cautious about borrowing.

Retail credit, which constitutes nearly one-third of the total loans in the system, is projected to grow at 13–14% in FY26, up from 12% currently. This will be supported by improved affordability in a lower interest rate regime, especially in the mortgage loan segment, according to a report by The Economic Times.

Meanwhile, global brokerage firm Goldman Sachs has retained its 'buy' rating on HDFC Bank, with a target price of ₹2,087 apiece, following the bank’s decision to lower its savings deposit interest rates. HDFC Bank has reduced the rate by 25 basis points to 2.75% for balances below ₹50 lakh — marking the first such cut since June 2020.

According to Goldman Sachs, this move reflects the bank’s confidence in continued deposit accretion, even at lower rates. Additionally, the savings rate cut is expected to help ease margin pressures as the economy enters a potential rate-cut cycle.

India’s retail inflation hits multi-year low

Retail inflation, which was released on Tuesday, based on the Consumer Price Index (CPI), came in at 3.34% annually in March, lower than the 3.61% registered in February and 4.85% reported in the year-ago period, according to the Ministry of Statistics and Programme Implementation (MoSPI) data.

After reporting a 6.4% growth during the December quarter, the slowest since Q4FY23, barring one quarter, economists now widely expect the central bank to opt for a rate cut in June.

Economists note that retail inflation eased in March 2025 to the lowest since August 2019, driven by a continued seasonal correction in food prices, though the decline remained uneven, as fuel and light and core inflation edged up during the same period.

The latest retail inflation data also supports the central bank’s shift to an accommodative stance and its decision to cut rates in April, with expectations of further easing in June.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.