Banking stocks had a mixed reaction to the RBI's move to hike short-term borrowing and lending rates today, with SBI and ICICI Bank extending their gains on the BSE, while HDFC Bank and IDBI Bank were in the red.
While some banking stocks reacted positively to the RBI announcement, most of them witnessed a negative trend, with private sector lender HDFC Bank registering a sharp decline.
The RBI today raised its short-term lending rate by 25 basis points and short-term borrowing rate by 50 basis points to check rising prices. The Reserve Bank had in July also raised these key rates by a similar percentage.
HDFC Bank, which scaled a new high of Rs 2,384 in early trade today, lost ground following the RBI action and was trading 0.19 per cent lower than its previous close at Rs 2,371.80.
However, the country's largest lender, State Bank of India (SBI), rose by 1.67 per cent to Rs 3,111.80 despite the hike in rates to emerge as the best performer in the Sensex-30 pack.
"The hike in rates was above market expectations and an aggressive approach from the RBI. The government is targetting inflation rather than overall growth," Ashika Brokers Research Head Paras Bothra said.
Mortgage lender HDFC also fell from its all-time high of Rs 686 to Rs 682 within minutes of trade, whereas another private sector player, ICICI Bank, was trading in the green with a gain of 0.72 per cent at Rs 1,106.70.
Among the other banking stocks, IDBI Bank was down by 0.11 per cent and Bank of Maharashtra were being quoted 0.84 per cent lower on the BSE. In contrast, Punjab National Bank rose by 1.79 per cent and Central Bank of India gained 2.27 per cent.
Reacting sharply to the development, the stock market benchmark Sensex plunged 113 points to hit a low of 19,388.65. However, the market soon recovered and the Sensex was trading at 19,516.04, up 13.93 points in afternoon trade.