Among the banking stocks that rallied in trade was Yes Bank which jumped 15 per cent, IndusInd Bank gained 11 per cent, while Axis Bank and Bank of Baroda both gained 6 per cent each.
Other notable gainers were HDFC Bank, Union Bank, Punjab National Bank and Bank of Baroda. Today's rally was largely on account of the RBI measures announced late on Tuesday to cool bond yields which had risen to as much as 9.48 per cent on Tuesday.
The Reserve Bank of India (RBI) said that it would buy government bonds through open market operations to the tune of Rs 8000 crores thus adding liquidity into the system.
"The hardening of long term yields has resulted in banks incurring large mark-to-market (MTM) losses in their investment portfolio. Since these MTM losses are partly resulting from abnormal market conditions and could be expected to be largely recouped going forward, the Reserve Bank has said that it would bring down the statutory liquidity ratio (SLR) securities in held to maturity (HTM) category from 25 per cent to 23 per cent of their Net Demand and Time Liabilities (NDTL) in a progressive manner in a prescribed time frame," the RBI said in a release.
Further, banks will now be allowed to transfer SLR securities to HTM category from available for sale (AFS) / held for trading (HFT) categories up to the limit of 24.5 per cent as a one-time measure.
Such transfer of securities from AFS/HFT category to HTM category should be made at the lower of the book value or market value. Banks have the option of valuing these securities for the purpose of such transfer as at the close of business of July 15, 2013.