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Tuesday, Oct 26, 2004

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Bank stocks dip on fears of upward rate bias

Our Bureau

Mumbai , Oct. 25

BANK stocks witnessed across the board selling on Monday's trading on fears that the Reserve Bank of India might signal an upward bias in the interest rates in the credit policy to be announced on Tuesday, brokers said.

The BSE Bankex, fell 2.33 per cent as compared to the 1.06 fall in BSE Sensex.

Among the major losers in the list included SBI (down 5 per cent at Rs 439.10 on BSE), Bank of Baroda (down 2.17 per cent at Rs 155.90), Bank of India (down 3.09 per cent at Rs 53.25), Canara Bank (down 4.60 per cent at Rs 143), Corporation Bank (down 3.72 per cent at Rs 258.80) and ICICI Bank (down 1.79 per cent at Rs 285.45).

Brokers and analysts said there was heavy selling in banking sector stocks on fears that RBI might increase interest rates between 25-50 basis points. Moreover, the rise in the bond yields in the last few weeks have caused concern among market players that banks would have to book loss due to rise in yields.

Ten-year bonds yields have increased from 5.75 per cent to 6.8 per cent this fiscal on fear of rise in interest rates.

Anand Rathi Securities, a stock broking and investment advisor firm feels that bonds market have been jittery on fear that the central bank will raise rates or indicate its willingness to raise rates over the interim period if inflation remains high.

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