The lenders, including ICICI Bank, are higher on hopes of easing liquidity as the Reserve Bank of India continues with cash injection measures and rate cut hopes in January.

Advance tax outflows and an increase in the government's cash balance with the RBI have temporarily exacerbated liquidity tightness in the sector.

The central bank announced on Monday it would conduct open market operations (purchase of government securities) for an aggregate amount of 80 billion rupees (USD 1.5 billion) on Dec. 28.

"We believe that the RBI will continue to announce open market operations in an ad hoc manner to inject liquidity into the banking system," Morgan Stanley said in a note.    

Since Dec. 4, the RBI has added liquidity worth 311.6 billion rupees (USD 5.7 billion) through three rounds of OMOs. ICICI Bank is up 2.12 percent while State Bank of India rises 1.6 percent.


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