Banking stocks reaped windfall gains on a day the market was enthused by the Reserve Bank of India’s (RBI) liquidity boost and the government’s stimulus package. The sectoral index jumped over 3.5 per cent to 5,674.31 on the Bombay Stock Exchange (BSE) and emerged as the third biggest gainer today, led by the country’s largest private sector lender ICICI Bank, which closed 6.04 per cent up at Rs 499.65.
Following a host of positive measures in the stimulus package, coupled with the central bank’s another round of cuts in key rates on the weekend, the equity markets today surged by around 3.2 per cent, driven by banking, metals, and oil & gas stocks. While shares of metals and oil and gas stood as the biggest gainers with their respective sectoral indices gaining over 5 per cent each on the BSE, almost all banking stocks closed in the green on the back of RBI’s move to ease the liquidity condition further by way of another cut in the cash reserve ratio (CRR) to 5 per cent.
“The rally in banking stocks is attributed to the stimulus package and RBI’s liquidity measures on Friday. Banks will continue to book profit as long as the yields on government securities (G-Sec) continue to go down, and there are expectations that the 10-year bond yields could fall further to around 4 per cent. Also, the sentiments are positive due to the central bank’s move to relax the provisioning norms on non-performing assets (NPAs),” said banking analyst at Brics Securities, Deepak Agrawal.
“The rally on the banking stocks are expected to continue till the first quarter of the next financial year. Except for ICICI Bank, the public-sector banks will outperform their private sector rivals, as the liquidity measures are essentially aimed at recapitalising the public sector banks,” added Agrawal.
| INSTANT RESULT | ||
| Top 5 Gainers | 5-Jan-09 | %chg* |
| Indus Ind Bank | 45.95 | 9.80 |
| Yes Bank | 88.15 | 8.29 |
| Canara Bank | 209.60 | 6.86 |
| ICICI Bank | 499.65 | 6.04 |
| Oriental Bank of Commerce | 174.85 | 5.02 |
| * over previous close, Share price in Rs | ||
The reduction in the CRR on Friday is expected to inject additional liquidity of around Rs 20,000 crore to the financial system. The apex bank has pumped in over Rs 3,00,000 crore into the financial system as primary liquidity through various measures, as the inflationary pressure kept easing.
Sares of the country’s largest bank State Bank of India rose 2.35 per cent to Rs 1,361.20, while IndusInd Bank stood as the biggest gainer on the Bankex with its stocks rising about 10 per cent at Rs 45.95 on the BSE today. HDFC Bank too booked gains of 2.66 per cent at Rs 1,042.80 on its BSE listed shares.
The banking sector has posted a fairly stable rally over the last month with the sectoral index gaining about 966.86 points or 20.53 per cent from 4,707.45 on December 5, 2008.
While this upsurge has been largely attributed to the central bank’s periodic monetary measures so far, analysts feel the trend could reverse post the first quarter of the next financial year as inflationary pressure might re-surface again.
Chennai based Federal Bank stood as the only loser on the BSE today with its stocks closing 0.06 per cent down at Rs 169.10.
