Banking stocks were in the limelight on Tuesday, with Axis Bank and HDFC Bank climbing 3 per cent after the Reserve Bank of India announced measures to inject liquidity of Rs 1.5 lakh crore into the banking system.

According to market experts, these measures are anticipated to ease liquidity conditions and increase the likelihood of an interest rate cut at the upcoming RBI policy meeting in February, offering relief to the banking sector amid concerns over high liquidity deficits.

The scrip of Axis Bank rose 3.20 per cent to trade at Rs 978.20 apiece, HDFC Bank shares advanced 3.09 per cent to Rs 1,680, ICICI Bank by 2.15 per cent to Rs 1,254.40 and IndusInd Bank went up 1.98 per cent to Rs 944.25 per piece on the BSE.

Bank of Baroda stock went up by 0.64 per cent to Rs 221 apiece, State Bank of India appreciated by 0.28 per cent to Rs 751.30 and Kotak Mahindra Bank increased 0.13 per cent to Rs 1,883.05 apiece on the bourse.

However, Federal Bank scrip plunged 4.97 per cent to Rs 181.70 per piece, Yes Bank fell 1.51 per cent to Rs 18.22 and Canara Bank decreased 1.20 per cent to Rs 90.75 per piece.

Axis Bank, HDFC Bank, ICICI Bank and IndusInd Bank were among the top gainers in the 30-share Sensex pack. Led by the gains in these stocks, the BSE bankex index climbed 905.14 points or 1.65 per cent to 55,608.43.

Meanwhile, the 30-share BSE Sensex climbed 595.57 points or 0.79 per cent to quote at 75,961.74 in the morning trade.

On Monday, the Reserve Bank of India said it will purchase government securities worth Rs 60,000 crore in three tranches and announced several other steps to inject liquidity into the banking system.

As part of measures to manage liquidity conditions, the central bank also announced a USD/INR Buy/Sell Swap auction of USD 5 billion for a tenor of six months to be held on January 31, 2025.

To inject liquidity, RBI said open market operations (OMO) purchase auctions of Government of India securities for an aggregate amount of Rs 60,000 crore in three tranches of Rs 20,000 crore each will be held on January 30, February 13, and February 20.

Besides, a 56-day Variable Rate Repo (VRR) auction for a notified amount of Rs 50,000 crore will be held on February 7.

"The Reserve Bank will continue to monitor evolving liquidity and market conditions and take measures as appropriate to ensure orderly liquidity conditions," the RBI said on Monday.

According to Geojit Financial Services' Chief Investment Strategist V K Vijayakumar, the RBI’s announcement of measures to boost the liquidity in the banking system by around Rs 1.5 trillion is positive for the market.

This raises the prospects of an interest rate cut by the RBI's Monetary Policy Committee (MPC) in the February policy meeting, Vijayakumar said.

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