The Hindu Business Line : Several bank stocks hit 52-week lows

Mumbai, June 10 Banking stocks were badly battered yet again on Tuesday, with the BSE Bankex shedding 171 points or 2.43 per cent from its previous day’s close. Over the last week, the index has shed 7.23 per cent and over the last month, 19.38 per cent.

Three banking stocks in theSensex basket were amongst the worst performing stocks of the day. HDFC Bank dropped 4.46 per cent, ICICI shed 2.47 per cent and SBI fell 1.06 per cent. The other banking stocks that declined today were Andhra Bank, Bank of Baroda, Canara Bank, Federal Bank and Indian Overseas Bank.

The BSE Bankex has been underperforming the benchmark index, the Sensex, for more than a month now. So it is no surprise that most of the banking stocks today touched their 52-week lows.

New lows

Among the stocks that recorded their new lows were ICICI Bank, SBI, Oriental Bank, Karnataka Bank, Axis Bank, Canara Bank, Allahabad Bank, Central Bank, IDBI Bank and Syndicate Bank.

Investors are uncertain as to what steps the RBI would take to rein in inflation, which is a major reason for investors wanting to exit the banking stocks. “The macro-economic numbers do not look very good now. The main concerns with regard to the banking sector now are the rising rate of inflation and with PSU banks it is the moral hazard created by the recently announced farm loan waiver. With inflation on the rise, further tightening of interest rates cannot be ruled out in the near future,” said Mr Vaibhav Agrawal, Senior Analyst-Banking, Angel Broking Ltd.

The country’s inflation had surged to 8.24 per cent, as per the data released on June 6, 2008, which has now added further pressure on the RBI to raise interest rates. To rein in inflation, the RBI had, in its monetary policy review in April this year, raised the CRR by 25 basis points.

‘No positive triggers’

“There are no positive triggers for the banking sector as of now. An increase in interest rates would put pressure on the banks’ margins and also put their balance sheets at risk. There is also the derivatives trading losses of the banks that the investors are worried about,” said an analyst with a stock broking firm.

The valuations of the banking stocks have come down and it does not look like they will rise substantially in the near future, said Mr Agrawal. “Only those that are looking at staying out for the long-term can look to investing in banking scrips,” he added.

“Structurally there haven’t been any major changes in our banks, but they have become more efficient. In the market these days everyone expects to make multiple returns overnight!” said a banking analyst at a brokerage.

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