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Kolkata Feb. 14 Bank stocks on Wednesday quite predictably bore the brunt of the Reserve Bank of India's move to increase CRR by 50 basis points. The Bank Nifty, constituted by a dozen stocks, declined 4.61 per cent to close at 5,672.45 points.

Leading the slide was Oriental Bank of Commerce, which dropped a massive 7.22 per cent on the National Stock Exchange. Heavyweights such as State Bank of India, ICICI Bank and HDFC Bank also recorded marked declines. These fell by 6.06 per cent, 4.34 per cent and 4.81 per cent respectively.

Some of the other index constituents, including Canara Bank and Bank of India, also dipped noticeably. In both cases, the decline was more than 4.5 per cent.

The only exception in the banking pack was the UTI Bank stock, which more or less maintained its level to close at Rs 518, a minor 0.53 per cent gain. It opened at Rs 506.30 on NSE.

Broking sources, referring to the RBI decision, said the move would take out considerable resources from the system. "The latest boost in the CRR is intended to simultaneously cool the economy and dampen inflation expectations without raising the key policy rate. The 50 bps CRR hike is expected to impound Rs 14,000 crore from the banking system," SPA Capital mentioned.

ICICI Securities pointed out that the easing of liquidity conditions has led to the hike. RBI, it added, is likely to maintain tightening bias into next the financial year. "We expect a 25 bps hike in repo rate in April policy. The economy is set to experience a slowdown in fiscal 2008," the company has mentioned.

Market sources maintained that some of the stocks in question recorded reasonable turnover on Wednesday. ICICI Bank was the top counter with Rs 307.24 crore on the NSE. This was followed by SBI, HDFC Bank, UTI Bank and Bank of India. Over 33 lakh shares made up the trading volumes for ICICI Bank on the exchange.

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