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Mumbai, Apr 2: As expected, the shares of banking and housing finance companies had to face the wrath of investors, following the Reserve Bank of India (RBI)’s decision to hike Cash Reserve Ratio (CRR) by 50 bps and Repo rate by 25 bps last Friday's. Investors were very much concerned about the hike in the interest rates as it would cool down the demand for loans. There has already been a slowdown in housing loans following a sustained rise in the interest rates over the past few days.
ICICI Bank, YES Bank and housing finance major HDFC has already raised their prime lending rates. ICICI Bank on Saturday has raised its benchmark lending rate by 100 bps to 15.75% and also raised its floating reference rate for consumer loans by 100 bps to 12.57%. YES Bank raised its prime lending rate by 75 bps to 14.75%. Similarly, HDFC has also raised its prime lending rate by 75 bps.
The RBI's intention to hike the interest rates is to reign in high inflation which is hovering around 6.50%, way above the central bank's own estimate of 5-5.50%. Also, it wants to discourage lending by the banks to sensitive sectors like housing, which acording to the RBI is suffering from a bubble kind of situation.
Sarika Lohra, banking sector analyst, Angel Broking, said, "Smaller banks will be the worst hit due to the CRR hike as they face liquidity problems. Even big banks will now have to rearrange their assets and the liability segment, and this will take some time. At least for a couple of months, there seems to be no great wonder in the banking stocks as the credit rates are going down. Also, the RBI decission of raising rates further cannot be ruled out. However, further fall in the sector may be seen as an opportunity as it will make the sector attractive from a long-term perspective."
As a result selling pressure gripped the banking counter in which most of the shares plummeted in the range of 4-10%. Banking heavyweights like ICICI lost 5.70% or Rs 48.60 to close the day at Rs 804.50. HDFC Bank ended the day at Rs 901.60 with a loss of 5.03% or Rs 47.80 while SBI slipped by 6.31% or Rs 62.65 to end the day at Rs 930.25. Housing finance major HDFC plunged by 5.77% or Rs 87.65 to end the day at Rs 1,432.70.
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