The RBI today cut the benchmark repo rate by 25 basis points, as widely expected by the market. However, banking shares are under pressure as the central bank has made it clear that it has little room for further reducing interest rates, because of issues like high inflation, high current account deficit and supply constraints.
Bank stocks are under pressure as the RBI has projected a dour outlook on economic activity and business confidence. A slow paced recovery could further compound the problem of bad loans for the banking sector.
A quick look at how the Bank Nifty has reacted to the previous monetary policies.