With the CPI Data for the month of March coming in at a surprisingly low figure of 5.17 per cent, it has raised expectations of an interest rate cut again by the RBI.
The RBI is expected to meet only in June for its policy review and a rate cut before that now seems a strong possibility.
There has already been some accumulation of banking stocks, particularly PSU banking stocks. Punjab National Bank has rallied from levels of Rs 146 to the current levels of Rs 165 in a span of two weeks.
Syndicate Bank in a week's time has already gained from Rs 99 levels to Rs 109.
PSU banks tend to see sharper rallies then private sector banks, which have already gained heavy ground in the last one year.
Economic Growth May Rebound
The International Monetary Fund and the World Bank say that at 7.5 per cent GDP, India will leapfrog China as the fastest growing economy.
There are already greenshoots emerging on the economic front and this is expected to gather momentum.
This could provide an impetus to banking stocks as economic growth could push demand for credit growth and help lower non performing assets.
Among the stocks that could benefit include the large cap PSU banks like Bank of Baroda, Punjab National Bank and Canara Bank.
Syndicate Bank which has all along been excellent in managing its non performing assets could see its stock price rise sharply as the company already has its NPAs under control.
Another 15-20 per cent rally in PSU banking stocks cannot be ruled out, though one cannot expect such a rally in private banking stocks.