Bank Stocks Rally After RBI Rate Hike: What’s Driving The Sharp Recovery?

Bank stocks are seeing a sharp recovery after the RBI’s 25 basis points rate hike, with expectations of another hike in December boosting sentiment around net interest margins. The improved FY27 GDP growth outlook is also supporting confidence in the banking sector. Prateek Ancha, Chief Economist, Axis Capital, explains why the rate hike is unlikely to significantly hurt growth and how tighter monetary policy could help contain inflation. The discussion also looks at the outlook for India’s growth, with FY27 growth expected to moderate as the impact of GST-led growth fades and tighter financial conditions create some headwinds for the economy.