Bankex slip steeper than Sensex, drops 3.13 %

Banking stocks continued to lag behind market averages on Friday amid expectations of weak fourth quarter numbers. Profit booking saw bank stocks ending the day as the biggest losers.

While Sensex sank by 1.34 per cent at 11589, BSE Bankex performance was even worse, tanking by 3.13 per cent at 5361. Key frontline stocks were down "" HDFC Bank (3.51 per cent to Rs 811.7), ICICI Bank (3.4 per cent to 600.45) and State Bank of India (2.8 per cent to 978.55). These three stocks have 13.95 per cent weightage in the Sensex and 70 per cent in Bankex.

All other major banking stocks such as Vijaya Bank (down by 5.08 per cent) at Rs 54.15, Bank of India (down by 4.81 per cent at Rs 130.75) and Canara Bank (down by 3.98 per cent at Rs 264.45) pulled the Bankex further down.

Although most sectors ended in the red owing to overall weakness in the market on Friday, one main reason for the weakness in bank stocks was the negative outlook predicted by leading broking firms for the fourth quarter.

Amid concerns of rising interest costs and liquidity crunch analysts are expecting weak net interest margins. Since the beginning of March, while the Sensex has gained about 10 per cent the Bankex has lagged behind with a gain of 2.5 per cent.

In Friday's trade, investors were booking profits across the board and shifting from the more expensive stocks to cheaper stocks.

This was the trend in banking stocks as well, a dealer explained. For instance, some funds were seen selling in counters such as HDFC Bank as valuations appeared expensive.

The biggest and the only gainer in the Bankex was IndusInd Bank (up by 4.1 per cent at Rs 57.7) here is news doing rounds in the market that the bank is likely to be a takeover target or looking for strategic stake sale to raise capital which will also improve its capital adequacy ratio.