The Hindu Business Line : Banking stocks still under selling pressure

Mumbai, March 5 Banks stocks continue to be under selling pressure as investors are trying to reduce their exposure following the news of sub-prime impact and farm loan waiver that created a lot of uncertainty in the counter.

More clarity

The BSE Bankex was once again among the worst performing indices on the bourses on Wednesday. The index was down 1.55 per cent on Wednesday and 11.8 per cent since Budget. The selling pressure was more severe in the PSU bank stocks than the private sector banks.

Bank of Baroda was down 6.50 per cent, Bank of India (7.64 per cent), Indian Overseas Bank (5.96 per cent), SBI (1.06 per cent) and Union Bank lost (6.63 per cent). While private banks such as Axis Bank was down 1.08 per cent, HDFC Bank (1.54 per cent), Kotak Bank (one per cent) and ICICI Bank was down 1.15 per cent.

Investors are expected to remain negative until more clarity emerges on the loan waiver issue, say marketmen. “Investors want to know how the Government would be paying back banks in the next three years. There is no clarity on this count as yet,” said a sub-broker with a brokerage.

Current uncertainty

Global investment bankers such as Credit Suisse and Morgan Stanley have downgraded Indian banks such as Punjab National Bank, Indian Overseas Bank and Union Bank, SBI and Canara Bank.

The downgrades follows the current uncertainty surrounding the sector, said an analyst. After leaving the global financial community in a tizzy, the sub-prime crisis has now hit the country’s leading private bank ICICI Bank, said a stock broker. The bank had suffered a mark-to-market losses of $264.34 million. The share prices of the Bank fell almost 6 per cent after this news on Tuesday. Even on Wednesday the scrip ended in the red by Rs 11 at Rs 960.

This is the tip of the iceberg, say analysts. “We do not know how many more banks will be affected by the sub-prime crisis. The markets will not take all this lightly, this includes the FIIs too,” said an analyst.

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