The Reserve Bank of India (RBI) expressing its willingness to play a superseding role on the banks having holding companies in insurance and asset management operations weighed on investors sentiments towards banking stocks, and in the ICICI Bank and SBI counter in particular. It also had an impact on the overall market, as it capped further rise of benchmark indices.
It was the BSE Bankex that bucked the general positive trend and ended the day in the negative territory, albeit marginally. Bankex fell by 0.25%, or 18.77 points, to end at 7,636 points. Compared to this, the 30-share Sensex of BSE gained 0.52% or 76 points to close at 14,919 points on Tuesday. The broader S&P CNX Nifty of the National Stock Exchange (NSE) also added 18.10 points, or 0.42%, to close at 4,320.70 points.
Major losers among the 18 constituents of the Bankex were the stocks of ICICI Bank and SBI. ICICI Bank was down 2.43%, or Rs 21.45, to close at Rs 862.30 while SBI slid by 0.50%, or Rs 7,85 to end at Rs 1,548.80. The Bankex had opened at 7,627 points in the morning.
A banking analyst from a domestic brokerage firm said that the investors’ sentiment had weakened after the apex bank stated in a discussion paper that it should have an overall supervisory responsibility for holding companies floated by the banks, to oversee insurance and asset management operations. A researh report generated by CLSA Asia Pacific Markets states that five firms, including Goldman Sachs, had earlier this year expressed their interest in acquiring 5.9% stake in IFS for $650mn, valuing the company at $10.4bn (pre-money), which amounted to Rs 380 per share share of ICICI Bank. The report further adds that if current valuation parameters were employed, then the subsidiaries could be valued at Rs 421 per share.
Similarly, a Motilal Oswal study pegs the valuation of SBI Life Insurance at Rs 25,900 crore ($6.3 bn) and the aggregate of other subsidiaries that include SBI Mutual Fund, SBI Capital Markets and SBI Cards and Payments at Rs 42,400 crore (above $10 billion). On the other hand, amidst global volatility, the Indian market too opened on a cautious note on Tuesday, but managed to close the day in the positive mainly on the back of short covering in the derivative segment.
Meanwhile, Nifty August futures closed at 4,298.80 points with a discount of 21.9 points to spot Nifty whereas Nifty September futures closed at 4,272 points with the discount widening to 48.7 points. A dealer with a domestic brokerage firm said that the widening of discount in September Nifty futures shows that short rollover is taking place ahead of the August derivative expiry.