Ministers consolidation talk, IPO hopes lift banking stocks

Mumbai, Oct 29 | Updated: Oct 30 2004, 05:30am hrs
Finance minister P Chidambarams indication of consolidation in the overall banking industry as well as plans to amend the Banking Regulation Act, 1949, to remove the 10% cap on voting rights and foreign banks will be allowed to take up to 10% stake every year over the next 3-4 years in Indian private sector banks lifted banking stocks on Friday. The firmness in the PSB stocks was also on hopes that these banks would come out with public issues for raising funds. As a result, in an otherwise weak market, the Bankex rose 21.05 points or 0.78% to settle the day at 2,736.61. Meanwhile, the BSE Sensex ended lower by 43.35 points at 5,672.27.

The Bankex opened flat at 2,717.43, up 1.87 points from its previous close of 2,715.56. Thereafter, the stock moved in a narrow range, which even touched an intra-day low of 2,713.95. However, after the finance minister in the afternoon announced governments initiatives in the banking space, the Bankex surged to touch an intra-day high of 2,741.62, before closing the day at 2,736.61. State Bank of India (up 0.65% to Rs 447.35) and ICICI Bank (up 1.41% to Rs 299) were the major gainers in the Bankex, that accounts for nearly 60% of the total weightage in the Bankex.

Karur Vysya Bank (up 2.19% to s 296.90), Karnataka Bank (up 4.27% to Rs 91.5), Kotak Bank (up 2.77% to Rs 179.85), UTI Bank (up 6.42% to Rs 152.50), Syndicate Bank (up 1.57% to Rs 35.5), Union Bank (up 1.34% o Rs 71.65), Federal Bank (up .86% to Rs 298.6), Bank of Baroda (up 1.22% to Rs 153.80) and Oriental Bank of Commerce (up 1.9% to Rs 239.15) were the other gainers among banking stocks. While removal of the cap on voting rights will reflect economic ownership of the shareholder, allowing foreign banks to acquire higher stakes will enable foreign banks to exercise greater control over private sector banks. While the announcement that government would encourage state-owned banks to raise capital from the market and that it expected more public share issues from them will help them to raise fund from further business expansion.