The Hindu Business Line : Bank stocks pull down market; Sensex sheds 175 points

BANK stocks led the overall decline on Indian bourses on Friday with the Sensex moving down by 175 points. Weak Asian markets and selling by FIIs dampened sentiment further.

Bank stocks moved down following the announcement of a huge equity dilution by ICICI Bank. Brokers said that market expectation that other banks would follow led to bank stocks' sales.

BSE Bankex and NSE's Bank Nifty recorded big falls among all sectoral indices. BSE Bankex index was down 2.58 per cent and NSE's Bank Nifty declined by 2.64 per cent.

In comparison, BSE Sensex was down 2.09 per cent (175.17 points) to close at 8,201.72 and NSE's S&P CNX Nifty closed at 2,484.40, down 2.08 per cent (52.9 points).

With today's fall, Sensex is down more than 600 points from peak of 8,822 touched on October 5.

"The markets went down quite sharply on weakness in the global markets and selling by the FIIs.

More weakness was seen because of the disappointing quarterly results from ACC," said Mr Hemang Jani, Associate Vice-President, Sharekhan, a retail broking firm.

"Crucial support level of Nifty is broken at 2,520. So the short-term trend is down, some recovery can be expected in the next week as we approach 2450 - 2460 levels of Nifty."

Selling in banks stocks was led by ICICI Bank and Union Bank. Most of the leading bank stocks declined in today's trading.

Analysts expect more banks to raise funds through the equity route in the next few months and this was leading to the selling pressure.

"We view the current round of equity dilution negatively, as this will further stress the operational parameters. Alternatively, ICICI Bank could have avoided equity dilution," Refco-Sify Securities said.

On the ICICI Bank equity dilution, foreign broking firm CLSA said the issue size at 60 per cent of current capital base is larger than our estimate ($1.5 billion) and will result in a 20 per cent equity dilution. It said issuance may not significantly be "earnings dilutive", it will drag down return on equity by a steep 400 basis points to 14 per cent.

Below market expectation performance by cement major ACC further dampened sentiment. ACC stock price was down 5.32 per cent at Rs 441.85 on NSE.

Gujarat Ambuja Cement (down 7.31 per cent at Rs 67.20) was another major loser among the index stocks.

However steel stocks like Tata Steel and SAIL remained firm on expectation of good results for the September quarter.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
`Low' crosses land; rain belt moving northward

Teles India router `helps cos cut phone bills'

Costlier food, energy rates push up inflation

Gas shortage leaves power utilities struggling

GAIL scouting for equity partners for Nabuko project

Cipla to launch generic drug for bird flu

H-1B visa holders being paid lower wages, says US tech workers' group

Bank stocks pull down market; Sensex sheds 175 points

Citigroup to focus on organic growth — Dedicates financial literacy centre to Indian School of Microfinance for Women