Better-than-expected quarterly results boost sentiment.
Banks were top performers on bourses today, as a majority of experts predicted the Reserve Bank of India (RBI) would raise policy rates by 25 basis points tomorrow. Besides, better-than-expected quarterly results boosted sentiment, with the Bombay Stock Exchange (BSE) Bankex closing 2.4 per cent up.
The YES Bank stock led the rally by notching a gain of 5.05 per cent, followed by Bank of Baroda (up 4.5 per cent), State Bank of India (3.66 per cent) and Axis Bank (2.94 per cent).
| ON A FIRM GROUND | ||||
| Bank | Net profit (Rs crore) | Growth (% y-o-y) | Stock price (Rs )* | Chg# (%) |
| SBI | 3,806.49 | 13.45 | 2,693.10 | 3.66 |
| ICICI | 2,039 | 77.50 | 1,083.90 | 1.69 |
| Union Bank | 579.57 | 8.50 | 337.75 | 3.33 |
| PNB | 1,089.77 | 7.76 | 1,154.40 | 2.84 |
| BoI | 653 | 60.80 | 467.45 | 1.30 |
| Indian Bank | 491.29 | 11.00 | 234.05 | 6.02 |
| Corporation Bank | 382 | 25.24 | 576.4 | -0.60 |
| * Closing price on BSE on January 24 # over the previous close | ||||
Ambareesh Baliga, vice-president, Karvy Stock Broking, said, “SBI numbers boosted the bank space today. The effect of RBI going ahead with an expected 25-basis-point increase in policy rates, along with better performance in the December quarter, helped banking shares rise.”
ICICI Bank, which announced its December quarter results today, reported a whopping 77.5 per cent increase in consolidated net profit to Rs 2,039 crore. SBI, which announced its quarterly numbers on Saturday, saw a 13.45 per cent increase in consolidated net profit to Rs 3,806.49 crore on the back of robust growth in net interest income.
Piyush Garg, chief investment officer, ICICI Securities, said, “Most of the negatives have already been factored in. As inflation was stickier at high levels, there was an anticipation of aggressive stand on interest rates by the central bank. However, RBI is unlikely to tighten beyond a point, as this alone cannot address the issue of inflation in primary articles.”
Since the beginning of November, banking stocks have been taking a beating, as inflation surfaced along with concerns about net interest margins (NIMs).
However, a reversal in the movement of banking stocks is still a possibility, say experts. “There will be short-term hiccups in the banking sector, as well as in the markets, may be in the next two quarters,” said Garg. Baliga agreed, saying, “In case there is a 50-basis-point rise in interest rates, it will have a negative impact on the overall market.” He added the current (March) quarter was likely to be tougher for banks on the NIMs front.
The BSE sensitive index, or Sensex, closed in the green today at 19,151.28, up 143.75 points, or 0.76 per cent.
