Banking stocks gain 0.7% on expected policy action

MUMBAI: The banking counters rebounded after an on-the-expected-line policy action by the Reserve Bank today taking the BSE Bankex nearly one per cent up, led by the market leader State Bank which gained over one percent.

Buoyed by the RBI move to leave the cash reserve ratio, which is the amount of funds banks have to park with the sectoral regulator, unchanged, the Bankex, which comprises shares of 14 banks, closed 0.69 per cent up, or 78.67 points, at 11,478.26 points today on the BSE.

Earlier in the day, the central bank hiked its short-term lending (repo) and borrowing (reverse repo) rates by 0.25 per cent and 0.50 per cent, respectively, while left the CRR and bank rates unchanged, which boosted the market sentiment. Moreover, the hike in the repo and reverse repo rates was in line with the Street expectation.

The broader index Sensex also closed up 57.56 points, or 0.32 per cent, at 18,077.61.

The Bankex gain was led by a rally in the State Bank counter which settled at Rs 2,435, up 1.09 per cent. During the trade, the scrip rose 1.53 per cent to touch an intra-day high of Rs 2,445.75.

ICICI Bank also gained 0.91 per cent at Rs 924.15 after jumping 1.20 per cent to Rs 926.85.

"This (rate hike) is a commendable policy decision to strike a balance between inflation and growth," SMC Capitals Equity Head Jagannadham Thunuguntla said.

"There is a clear bias for policy rates to move up for the reason that inflation is still very high and inflationary expectation is to be contained. The bias is going to be upward," opined experts.

The other bank stocks which closed with gains are--HDFC Bank up (0.67 per cent), Punjab National Bank (1.38 per cent), Oriental Bank of Commerce (2.10 per cent), IDBI Bank (0.84 per cent), Bank of India (0.71 per cent), Canara Bank (0.02 per cent), Bank of Baroda (0.10 per cent), Bank of Maharashtra (0.08 per cent), Indian Bank (0.59 per cent). The only loser in the index was UCO Bank which closed down 0.55 per cent.