(Reuters) – Shares of most Indian financial companies, especially those of non-bank and microfinance-focussed lenders, jumped on Thursday after the central bank further eased its capital requirements for micro loans and bank credit.
Financial stocks, which include non-bank finance companies (NBFCs), jumped about 1%, outpacing the 0.7% increase in banking stocks. The benchmark Nifty 50, in comparison, was flat.
The Reserve Bank of India, on Tuesday, trimmed the higher capital requirements introduced in November, the latest in a series of growth-supportive measures since Sanjay Malhotra took over as governor in December.
Under his watch, the RBI has eased liquidity, delayed some regulations and loosened restrictions placed on some lenders.
“We think this bodes well for the financial sector and lays more emphasis on consumption and growth … and (we) reiterate our bullish view,” Macquarie analyst Suresh Ganapathy said in a note.
On the day, Bandhan Bank gained 6%, while Shriram Finance, AU Small Finance Bank and Ujjivan Small Finance Bank rose about 5% each.
Cholamandalam Investment and Finance and Aditya Birla Capital advanced 4.5% each. Bajaj Finance rose 2.7% and IndusInd Bank gained 2%.
In comparison, top private lenders such as ICICI Bank and HDFC Bank were up under 1%.
The RBI’s move should help most NBFCs’ earnings, Morgan Stanley analysts said, picking Aditya Birla Capital, PNB Housing, Shriram Finance and Bajaj Finance as top beneficiaries.
Nomura analysts said banks with higher microfinance loan exposure, such as Bandhan Bank, IndusInd and AU Small Finance Bank, would also get much needed relief.
Since the rules were implemented in November, Aditya Birla Capital’s shares had slid 16%, while AU Small Finance Bank and IndusInd Bank sank 28% and 31%, respectively. The worst hit, with a 38% tumble, was Bandhan Bank — the day’s top gainer.
However, Axis Bank Chief Economist Neelkanth Mishra cautioned that a reversal in the broad-based slide in loan growth — caused by high liquidity costs and the RBI’s discomfort with high loan-to-deposit ratios — could take time.
“While these (RBI) signals should help revive lending, we believe the binding constraint remains durable liquidity.”
(This story has been refiled to say Thursday, not Wednesday, in paragraph 1)
(Reporting by Sethuraman NR; Editing by Savio D’Souza)
