Indian equity indices traded nearly flat on Thursday, with the Sensex marginally down by 3.68 points at 80,979.63 and the Nifty 50 declining 4.85 points to 24,831.45. The day's trading was influenced by the Reserve Bank of India's (RBI) monetary policy decision and sector-specific movements.

RBI Policy Impact

The Reserve Bank of India maintained its accommodative stance, keeping the repo rate unchanged at 5.50%. In a move that could boost market sentiment, the central bank lowered its inflation forecast to 2.60% from the previous 3.10%. Additionally, the RBI raised its GDP growth projections to 6.80% from 6.50%, signaling a more optimistic outlook for the Indian economy.

Sector Performance

Metal Stocks Lead Gains

Metal stocks dominated the day's gains, with several key players seeing significant upticks:

Other Notable Movers

• Power Grid Corporation climbed 2.10% to close at ₹286.55.
• Kotak Mahindra Bank added 1.38%, ending the day at ₹2,091.70.

Market Decliners

Despite the overall positive trend, some stocks faced downward pressure:

• Max Healthcare saw a significant drop of 3.85%, closing at ₹1,070.30.
• SBI Life Insurance declined by 1.68% to ₹1,770.80.
• Coal India fell 1.56%, ending at ₹382.45.

Market Breadth and Investor Activity

The market breadth remained positive, with 2,377 stocks advancing against 1,621 declines. This indicates a generally optimistic sentiment among investors.

In terms of investment flows:

• Foreign institutional investors (FIIs) were net sellers, offloading equities worth ₹1,605.00 crore.
• Domestic institutional investors (DIIs) showed confidence in the market, purchasing ₹2,916.00 crore worth of equities.

The day's trading reflected a cautious approach by investors, balancing the RBI's growth-supportive stance against global economic factors and sector-specific performances.

Axis Bank , one of India's leading private sector banks, has decided to put its plans to sell a stake in its non-banking subsidiary, Axis Finance, on hold. The delay comes as potential investors seek clarity on upcoming regulatory guidelines before finalizing valuations.

Regulatory Clarity Awaited

The bank's decision to reassess the stake sale is primarily due to investors waiting for the Reserve Bank of India's (RBI) forthcoming 'forms of business' circular. RBI Governor Sanjay Malhotra has indicated that this circular will be finalized quickly, which could have significant implications for the valuation of bank subsidiaries.

Capital Raising Plans

Axis Bank had previously committed to the RBI that it would not infuse additional capital into Axis Finance. Instead, the bank was working on raising Rs 3,000.00 crore through a strategic sale to private equity investors. Amitabh Chaudhry, CEO of Axis Bank, stated that Axis Finance would require "a couple of thousand crores of capital over the next few years" to support its growth plans.

Impact of Draft Guidelines

The commitment made by Axis Bank relates to draft guidelines issued last October concerning forms of business and prudential regulation for investments. These guidelines have impacted the valuations of bank subsidiaries by:

1. Restricting core lending activities
2. Discouraging business duplication between banks and their NBFC arms

Investor Interest

Despite the regulatory uncertainty, several global private equity firms have expressed interest in acquiring a 20% stake in Axis Finance. These include:

• Blackstone
• Advent
• EQT
• Kedaara

Valuation Challenges in the Sector

The non-banking financial sector is currently facing valuation challenges. A recent example is HDB Financial Services, which entered the market at a valuation nearly 40% below its unlisted market price. This trend underscores the importance of regulatory clarity for potential investors in Axis Finance.

As the financial sector awaits the RBI's new circular, the outcome could significantly influence the valuation and future of Axis Finance, as well as similar subsidiaries of other banks. Axis Bank's decision to delay the stake sale demonstrates the critical role that regulatory frameworks play in shaping investment decisions in the banking and financial services sector.