Shares of Ujjivan Small Finance Bank surged sharply on Tuesday, breaking out of a consolidation phase after the Reserve Bank of India (RBI) surprised the market with a 50 basis point cut in the repo rate, spurring investor optimism across interest rate-sensitive sectors.
The stock climbed over 6% intraday, hitting a fresh multi-month high, as lower interest rates are expected to reduce borrowing costs and improve credit growth for small finance banks (SFBs). Analysts noted that the rate cut could bolster net interest margins (NIMs) and strengthen loan book expansion for lenders like Ujjivan SFB.
RBI’s Policy Surprise Spurs Rally
The RBI’s unexpected rate cut, announced on June 6 during the Monetary Policy Committee (MPC) meeting, aims to boost liquidity and encourage lending amid signs of softening inflation. While most economists had forecast a modest 25 bps cut, the central bank’s move exceeded expectations, immediately sending banking and financial stocks higher.
Ujjivan SFB, which primarily lends to micro, small, and medium enterprises (MSMEs), is among the key beneficiaries of the accommodative policy stance.
“The sharp rally in Ujjivan SFB reflects a broader sectoral tailwind, as rate cuts are positive for credit growth and can reduce cost of funds,” said a senior analyst at a Mumbai-based brokerage firm.
Strong Fundamentals and Growth Outlook
In its Q4 FY25 earnings, Ujjivan SFB reported a robust 33% YoY rise in net profit, driven by higher net interest income and improved asset quality. The gross NPA ratio declined to 2.2% from 3.1% YoY, reflecting healthier borrower repayment behavior.
The bank has also guided for strong loan growth of 25–28% for FY26, buoyed by rural demand and an expanding footprint in underbanked regions.
With RBI’s policy pivot, analysts expect Ujjivan’s cost of funds to decline further, supporting profitability.
Technical Breakout Seen
According to technical analysts, Ujjivan SFB has broken out of a key resistance level around ₹41, accompanied by high trading volumes.
“The stock has formed a bullish flag pattern and crossed its 200-day moving average, indicating momentum strength,” said Anshul Jain, Head of Research at Lakshmishree Investments. “It could test the ₹47–₹50 levels in the near term if positive sentiment persists.”
Outlook
With the RBI now signaling a pro-growth stance and financials expected to benefit from higher credit offtake, Ujjivan SFB remains a stock to watch in the small finance bank space. The bank’s granular loan book, digital initiatives, and improving operational metrics add to its appeal for long-term investors.
Disclaimer: This article is for informational purposes only and not investment advice. Please consult your financial advisor before making any investment decisions.
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