The BSE Bankex index moved up 134.95 points or 1.7 per cent to close at 8,055.14 points. Top bank stocks made gains of over one per cent each. Of the total 18 stocks listed on the BSE Bankex, 13 advanced while 5 declined.

Market men said there was consensus among players that interest rates would remain untouched and banks would start cutting deposit rates, reducing the cost of funds.

“RBI may use the method of increasing the cap in the reverse repo window to suck the excess liquidity instead of hiking cash reserve ratio (CRR). This will help banks to make money at a higher rate than in the call money market through the reverse repo window. This will help improve the bank’s profitability,” said Mr Saday Sinha, banking analyst, Kotak Securities.

Banks would benefit from this as their margins will now improve, increasing their profitability, said a banking analyst.

Bank stocks have been beaten down in the past week and the upward trend in the market sentiment also seemed to have helped, said market analysts. “The positive market sentiments and good results from State Bank of India also boosted the stocks,” said Ms Sarika P. Lohra, banking analyst Angel Broking.

SBI stock jumped 5.26 per cent to close at Rs 1,579 on the BSE, while ICICI bank gained Rs 9.3 or 1.02 per cent to end at Rs 923.55.

UTI bank, which recently changed its name to Axis bank ended 4.97 per cent higher at Rs 639.

“Most banks are expected to have their Asset-Liability Committee Meeting tomorrow, post the credit policy to take a decision on the deposit rates if the CRR is not hiked,” said Ms Lohra.

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