RBI brings reality dose to bank valuations

RBI gives reality check to valuations, but liquidity lulls investors
RBI Governor Shaktikanta Das said current valuations do not reflect reality and has even linked it to financial stability.Premium
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Reserve Bank of India (RBI) governor Shaktikanta Das has yet again said that equity valuations do not reflect reality and has even linked it to financial stability. But unlike the foreign exchange market, where RBI has been successful in talking down or up the exchange rate, equity markets didn’t seem to heed the warnings.
“Stretched valuations of financial assets pose risks to financial stability. Banks and financial intermediaries need to be cognizant of these risks and spillovers in an interconnected financial system," Das wrote in his foreword to the financial stability report released on Monday. Equity indices ended in the green on Tuesday, supported by liquidity and vaccine optimism. Even bank shares gained after a brief spell of pressure.

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