Tailwind for banking sector shares

MID-TERM REVIEW OF ANNUAL POLICY 2004-05/ DIFFERENT STROKES

The Bombay Stock Exchange (BSE) index of bank stocks, the Bankex, gained 1.13 per cent to close at 2690.60 in the wake of the encouraging mid-term review of monetary and credit policy.

Sensex heavyweight State bank of India gained 2.89 per cent to close at Rs 451.80, ICICI Bank was up 0.53 per cent to Rs 286.95, and HDFC Bank gained 0.22 per cent to Rs 409.55.

Outside the Sensex basket, the State Bank of Mysore scrip was the biggest gainer, up 8.59 per cent to Rs 1,580, while the State Bak of Bikaner & Jaipur fell 4.77 per cent to Rs 1759.20.

Brokers said that sentiment was boosted after the RBI left the bank rate unchanged. Players said banking scrips witnessed some relief buying today after having witnessed some selling pressure in the last few sessions, on fears that their trading profits would be hit by higher bond yields.

Equity market players said the central bank's decision to hike only the short-term interest rate and leave the benchmark used by banks to price their lending and deposit rates unchanged was viewed positively.

At its mid-year policy review on Tuesday, the central bank said it would raise the fixed repo rate by 25 basis points.

A dealer with a local brokerage firm said, "The buying was also because the stocks had witnessed some selling pressure in the last few sessions and some relief buying was expected at lower levels."

He added that the central bank's policy had not thrown up any unpleasant surprise. Some analysts added that the central bank's decision to leave bank rates unchanged indicates that the bias is still towards softer interest rates.

Thirty of 37 banking scrips closed higher but gains were mostly capped. Other top banking scrip gainers were ING Vysya, up 4.94 per cent at Rs 300, Bank of Punjab, up 3.17 per cent to Rs 22.75, Centurion Bank gained 3.01 per cent to Rs 7.87 and Canara Bank was up 3.01 per cent to close at Rs 147.30. While losers included State Bank of Travancore, down 3.36 per cent to Rs 1552 and Kotak Mahindra Bank fell 2.90 per cent to Rs 175.85.