Banking stocks have gained between 5 per cent and 11 per cent on the Bombay Stock Exchange (BSE) in the last two days on higher advance tax payments by banks and a correction in valuation of small banks.
A total of 15 banking stocks are currently trading at their respective 52-week highs. These include State Bank of India (SBI), ICICI Bank, Punjab National Bank, Bank of Baroda, Corporation Bank and Oriental Bank of Commerce.
The BSE Bankex, an index of banking stocks, has gained 5 per cent in the last two days. It closed at an 18-month high of 9,361.27 on Wednesday.
| BRIGHT OUTLOOK | |||
| Price on BSE in Rs | % chg | ||
| Sep 14, '09 | Sep 16, '09 | ||
| Indian Bank | 147.19 | 163.25 | 10.90 |
| ING Vysya Bank | 259.60 | 287.70 | 10.80 |
| Allahabad Bank | 106.30 | 115.55 | 8.70 |
| Dena Bank | 57.65 | 62.50 | 8.40 |
| Union Bank | 226.75 | 245.40 | 8.20 |
| Lakshmi Vilas | 108.25 | 117.05 | 8.10 |
| IOB | 99.90 | 107.55 | 7.70 |
| IDBI Bank | 105.65 | 113.30 | 7.20 |
| Canara Bank | 298.85 | 320.45 | 7.20 |
| Yes Bank | 177.85 | 190.35 | 7.00 |
The index has outperformed the Sensex by rising 151 per cent from its low of 3,728.22 on March 5, 2009. In comparison, the Sensex has risen 103 per cent from 8,197.92 to 16,677.04 during the period.
Vaibhav Agarwal, a banking analyst with Angel Broking, said the indication that the Reserve Bank of India might increase the limit for held-to-maturity (HTM) category of bonds for banks was a short-term positive. Plus, the valuation gap for small public sector banks was getting corrected, he said.
The increase in the HTM limit is expected to reduce the mark-to-market (MTM) risks related to long-term bond portfolio of banks. Many banks have already reached the HTM limit. Long-term securities picked up in excess of the HTM limit have to be put in the available-for-sale (AFS) category, where the portfolio is marked to market. If bonds yields start rising (meaning bond prices are declining), banks have to provide for erosion in value of bonds held in the AFS portfolio.
Analysts said a sharp surge in advance tax payments in the second installment raised expectations of robust second-quarter (July-September 2009) results. The banking sector posted 63 per cent jump in net profit during the quarter ended June 2009. Increased spending on consumer durables and automobiles and improved demand for housing has spurred interest in bank stocks, say analysts. Retail lending has been a key profit driver for banks in recent times, they say.
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Indian Bank, ING Vysya Bank, Allahabad Bank, Dena Bank, Union Bank of India, Lakshmi Vilas Bank and Indian Overseas Bank have appreciated between 8 per cent and 11 per cent in the last two days.
The SBI stock crossed the Rs 2,000 mark after a gap of 18 months. The stock has gained 7 per cent in last two days from Rs 1,956.15 to Rs 2,089.60 on reports that the lender has paid Rs 1,838 crore as the second installment of advance tax compared to Rs 1,500 crore during the same period of the previous year.
ICICI Bank gained 5 per cent to Rs 867.55 (Rs 825.55) while Punjab National Bank rose 7 per cent to Rs 773.70 (Rs 723.65).