PNB, Kotak Mahindra Bank, other bank stocks rise up to 2% after RBI’s rate hike, Nifty Bank above 55,500

Indian bank shares advanced after the RBI raised the repo rate by 25 basis points to 5.50% on Monday and adopted a calibrated tightening stance. Kotak Mahindra Bank, Punjab National Bank, Union Bank and Canara Bank were among the gainers, with advances of up to 2%, while the Nifty Bank moved above 55,500. Kotak Mahindra Bank was at Rs 439.15, up 1.7% for the day, after gains of 4.0% over one month and 15.1% over three months. Canara Bank traded at Rs 119.93, up 1.8%, despite declines of 4.2% over one month and 5.0% over three months.

The reaction suggests investors initially see higher policy rates as manageable for lenders and potentially supportive of loan yields. The benefit depends on how quickly banks can reprice assets relative to deposits, while tighter money may also raise funding costs, slow credit demand and test asset quality. Kotak Mahindra Bank, Punjab National Bank, Union Bank and Canara Bank are directly exposed, as is the broader banking sector, which was down 4.2% over one month and 3.8% over three months. Resilient margins, deposits and loan growth would confirm the positive reading. Faster deposit repricing, weaker borrowing or rising stress would weaken it.