Business Daily from THE HINDU group of publications
Tuesday, Dec 12, 2006
ePaper
Business Daily from THE HINDU group of publications Tuesday, Dec 12, 2006 ePaper |
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Markets
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Stock Markets Our Bureau
Mumbai , Dec 11 The BSE Bankex dipped 463.96 points or 6.43 per cent to close at 6,749.78 on the RBI decision to raise the Cash Reserve Ratio to 5.50 per cent. Heavyweights of the index, State Bank of India (down Rs 110.75 or 8.18 per cent to close at Rs 1242.75) and ICICI Bank (down Rs 57.30 or 6.54 per cent to end at Rs 819.40), led the market fall. "A rise in CRR was not expected at this time. The move reflects the concern of the RBI over increasing dollar inflows and inflation. Post-hike in CRR, bank profits could be impacted. The net interest margins of banks should be under pressure,'' said Mr Rakesh Kumar, banking analyst, Karvy Stock Brokers. Shares of HDFC shed Rs 51.05 to close at Rs 1034. Bank of Baroda (down 8.49 per cent at Rs 239.15), Bank of India (down 10.06 per cent at Rs 184.15) and Punjab National Bank (down 8.13 per cent at Rs 508.65) dropped on the bourses. As CRR deposits do not fetch any income, banks will be forced to hike deposit and lending rates to protect margins, analysts said. "The hike in CRR will have an impact on long-term liquidity due to credit multiplier effect. This will increase the cost of funding for the banks thereby increasing interest rates on loans,'' Mr Kashyap Jhaveri, banking analyst, Emkay Shares and Stocks. Market watchers, however, feel the slump will help banking stocks to regain their fair value. Most analysts felt the stocks were a bit overpriced over the past few trading sessions.
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