Banking stocks shrugged off the Reserve Bank of India’s rate hikes on Thursday with the BSE Bankex actually closing in the green after a gain of 0.59% on a day when the 30-share Sensex slipped 0.43%. ?There was no major impact on the banking stocks as the market had priced in the rate hike already,? said Raamdeo Agrawal, co-founder, Motilal Oswal Financial Services. The worst of the tightening seems to be over. Sandesh Kirkire, CEO, Kotak AMC, added ?The rate hike has been in line with the expectations. The policy is going to lead to a reduction in volatility at the shorter end of the yield curve on account of reduction in the reverse repo and repo corridor to 1%.? Kirkire said there would be no major impact on the banking business. ?Banks are in a position to manage their ALM risk by re-pricing both their assets and liabilities,? he said.
Of the 14 BSE Bankex stocks, 8 scrips advanced while 6 declined. IndusInd Bank and Bank of Baroda gained more than 2%, while State Bank of India, Punjab National Bank and Axis Bank rose about a percentage point each. Major losers included Federal Bank (down 3.06%), Bank of India (2.5%) and IDBI Bank (1.93%).
Banking stocks have been on a roll of late due to the robust macro-economic data and heavy buying from foreign institutional investors. Several scrips, in fact, have been touching new highs. State Bank of India, the country?s biggest lender, touched an all-time high of Rs 3,175 on the BSE on September 13. Banking scrips are especially sensitive to rate hikes as it impacts their credit offtake, which contributes significantly to their earnings. This year the Bankex index has gained about 35% compared with Sensex?s rise of 10.59%.
According to an analyst, the policy was more directed toward normalisation of rates. ?It was a hawkish move and considering the inflationary pressures was not surprising,? he said, adding that banks may not be in a hurry to raise interest rates and the rates would not severely impact their loan growth.
?With the global monetary policy still loose and ample liquidity across the world, the RBI seems to be worried about what will happen to the credit demand back home,? said Agrawal. ?We see better times for the banking industry. The inflation figures will be tracked closely.?