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Bank stocks draw buying interest

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Our Market Bureau Mumbai
Banking stocks saw significant bargain hunting at lower levels, after the stocks were hammered following the Finance Minister's interim budget on Tuesday.
 
Both public sector as well as private sector bank stocks saw some aggressive buying interest from domestic as well foreign institutional investors in the last two days.
 
Analyst tracking the sector said though the provision of allowing farmers loans at a concessional 9 per cent interest rate will impact the sentiment, it won't make a significant dent on their bottomline.
 
Also the provision of providing loan to farmers at 2 per cent lower than the prevailing rate was very much there in the budget for 2003-04.
 
So there are no major surprises in the announcement, most analysts reacted. There was lot of speculative activity in most bank counters which lead to offloading by big operators in Tuesday's trading, said a market source.
 
Union finance minister Jaswant Singh in his interim budget on Tuesday asked banks to offer lower interest rates on crop loans.
 
"In July 2003, a reduction in rate of interest for crop loans to 9 per cent by public sector banks was announced. The Nabard Act was also appropriately amended. I have been urging the Indian Banks' Association to further lower interest rates for agricultural purposes. Some public sector banks have already done so. I am confident that other banks will also respond by offering loans at rates lower than those prevailing currently," the FM said in his interim budget speech.
 
While the private sector banks were marginally affected, the public sector bank stocks were hit hard in Tuesday's trading.
 
The BSE bank index which was down nearly 2 per cent on February 3 at 2,772.46 with State Bank of India, Bank of Baroda, Punjab National Bank and Allahabad Bank down in the range of 4 to 8 per cent recovered in the last two days to close at 2,868.57.
 
Most of the above stocks recovered on bargain hunting at lower levels. Jigar Shah, head of research, KRC, said, "I don't think Tuesday's announcement in the interim budget that the bank will have to lend the farmers at 9 per cent interest rate will have any negative impact on the bottomline of banks. The government can't force banks to lend if they find it imprudent to lend at those levels."
 
In two day's trading, SBI and Bank of Baroda recovered from Tuesday's losses. SBI ended at Rs 582.20, up Rs 11 from its close on Tuesday, while Bank of Baroda scrip gained Rs 13 to close at Rs 220.50 compared with its Tuesday close of Rs 207.29.
 
A research head with a domestic brokerage firm said, "Yesterday's fall was one of the instant reactions which is very much evident from today's bounce back. I don't think lending to farmers at 9 per cent interest rate would impact the profitability of the banks in a big way. Going forward, the performance of the banking sector will depend on the monsoons and the credit offtake by corporates."
 
Ambrish Baliga, of Karvy Stock Broking, said, "Lending at 9 per cent is not a negative news for banks and thus most counter witnessed a smart bounce back in today's trading."

 
 

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First Published: Feb 06 2004 | 12:00 AM IST

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