Financial Daily from THE HINDU group of publications
Friday, May 06, 2005
Money & Banking - Financial Policy
Markets - Stock Markets
Pvt bank stocks buoyant as cap on voting rights goes
Mumbai , May 5
AFTER weeks of sluggishness, banking stocks rode a smart rally today as the markets welcomed the announcement of banking reforms.
Even before the real impact of these announcements could be analysed, positive sentiment enveloped the markets - that have been languid for several weeks - and stocks joined the rally regardless of sector or size.
Broad rally notwithstanding, the day clearly belonged to the banking stocks.
The biggest gainers among them were the older private sector banks. Karnataka Bank, which was locked at the upper circuit, led the rally.
The scrip gained 19.95 per cent and closed at Rs 77.85.
South Indian Bank registered a 17.28 per cent gain at its closing value of Rs 70.60. Federal Bank and Dhanalakshmi Bank both netted gains of over 14 per cent.
However, the behemoths of the sector, State Bank of India and Punjab National Bank witnessed very little market interest.
The scrip of State Bank of India rose marginally by 0.87 per cent and that of Punjab National Bank gained 0.97 per cent.
Analysts attribute the activity in the smaller private bank stocks to the fact that they now become prime acquisition targets.
"There are now not many banks that will remain qualified for acquisitions," said Mr Girish Nadkarni, Chief Operating Officer, IL&FS Investsmart.
The Government, on Wednesday, approved two Bills that would give Reserve Bank of India powers to revise SLR and CRR limits of commercial banks.
Suggestions also include the removal of the voting cap of 10 per cent in private sector banks.
Adding to these reforms, RBI today announced the raising of the dividend ceiling on banks from 33 per cent to 40 per cent. Though all measures are welcome, the raising of the dividend ceiling has caused excitement among investors, according to market participants.
Though market experts do not see a big impact of the measures announced in the long term, the short-term effect on market sentiment is crucial, they say.
Bankex, BSE's index of banking stocks, gained 95.22 points to grow by 2.65 per cent. Intra-day, the index had posted over 3 per cent in gains.
Overall, the Sensex gained 70.10 points to close Thursday's trade at 6359.65. It touched an intra-day high of 6391.32.
The Nifty also closed firmly with a gain of 1.07 per cent at 1963.30.
Market experts are, however, not confident about Thursday's gains setting the bourses on a path of bullishness. "For a strong rally, news should be stronger than what happened today. Otherwise, the markets will continue to be range bound, perhaps veering towards the negative," Mr Nadkarni said.
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