Most analysts had already factored in a 18 per cent hike in basic wages for banks. In effect, the liability is lower than expected. Hence the Friday rally in SBI stock, which has seen a host of other bullish news, has already discounted this. The bank has made a provision of Rs 120 crore in its revenue statement last year on account of higher wages, though no incremental provisions has been made in the current year.

The SBI stock rallied to Rs 222 thanks to the heavy buying interest especially from foreign funds as most FII analysts took the news positively. In addition, some traders are anticipating another half a percentage cut in CRR in the first week of April. Last week, the RBI had reducedthe CRR to 10.5 per cent from 11 per cent and another cut will take it to 10 per cent, which should improve returns from banks as CRR funds earn 4 per cent.

Corporation Bank also shot up. Off late, the stock has seen speculation, displaying high volatility. Besides, unlike in SBI's case, FII buying has risen considerably, hence muting demand from that section. The additional outflow in Corporation Bank on account of higher basic wages may be between Rs 12-15 crore per annum.

The SBI stock has been rocked by volatility in the past couple of days as the sharp 45 per cent rally ended at the begining of the week. Traders expect the stock to oscillate between Rs 205-220 for in the near future.

Mahindra & Mahindra: Halting strides

Talk of an attractive valuation of Mahindra-British Telecom, the telecom software solutions subsidiary of Mahindra & Mahindra, had seen buying interest at the M&M counter a few weeks ago. A similar trend was seen later in L&T. After an initial spurt, however, the M&M stockhas stagnated. For the past two weeks, the stock has only moved in the range of Rs 225-265.However, except for the re-rating on the basis of the subsidiary's business, there have been few changes which could be considered for a re-evaluation. The budget was, more or less, neutral for the company. While the restoration of the modvat credit to 100 per cent was positive, the change in the excise structure is expected to have a negative impact on the tractor business (an area where M&M's performance has been impressive till recently).

The tractor business has seen some slowdown in growth in the current year. For the April-December period, tractor sales grew by 2.2 per cent, much lower compared with the number two player (in terms of marketshare), Punjab Tractors. With a 20.1 per cent jump in sales, PTL grabbed the number two position from Escorts. While M&M has a 26.9 per cent market share, PTL's share is a somewhat distant second at 18.5 per cent. The utility vehicle business is also suffering from a slowdownin demand. However, for the stock market, both these factors are well known. Since it was fully factored in last year itself, any negative news is unlikely to have a downward impact on the price.

Technically, since the stock has formed a congestion pattern for the past two weeks, an uptrend on the counter could accelerate only after it crosses Rs 270 as more buying is expected to come in. A move from this level could take the stock above Rs 300.