Bank shares zoom on voting rights buzz

Prices of private sector bank shares have shot up significantly of late in anticipation that the Reserve Bank of India (RBI) will relax the 10 per cent cap on voting rights.

Analysts said these stocks are catching up with their peers such as ICICI Bank and HDFC Bank, in terms of valuations. Favourable news from Karnataka Bank and ING Vysya Bank has also boosted the sentiment.

As a result, private sector banking stocks such as Karur Vysya Bank, Karnataka Bank, Federal Bank, United Western Bank, IndusInd Bank, Centurion Bank, IDBI Bank, J&K Bank, South Indian Bank and City Union Bank have seen a sharp spurt in prices in the last one week.

For example, the Federal Bank stock has appreciated 5.21 per cent from Rs 146.69 on December 9, 2004 to Friday's close of Rs 152.05.

The volumes too have jumped from a little over 62,000 shares on the Bombay Stock Exchange on December 9 to more than 4 lakh shares on Friday.

Similarly the United Western Bank stock has gained 4.82 per cent in the same period to Rs 44.45, Karur Vysya Bank scrip is up 16.77 per cent from Rs 365.9 to Rs 478.75, ING Vysya Bank stock is up 50 per cent from Rs 401.00 to Friday's close of Rs 603.35, J&K Bank scrip is up 6 per cent per cent from Rs 342.25 to Rs 361.40 on Friday on the back of good volumes..

Analysts tracking the banking sector said: "One of the primary reasons for private sector bank stocks doing very well is that they have not participated in the recent the rally and there is a general expectation in the market that the 10 per cent cap on voting rights will be relaxed by the Reserve Bank of India."