Strong earnings, ease in inflation propel bank shares

MUMBAI: Banking shares rallied Friday soon after the inflation figures were out. BSE Bankex closed 3.33 per cent higher at 8,868.08 compared with 2.42 per cent rise in Sensex.

Inflation for the week ended April 12 rose 7.33 per cent, accelerating from previous week's rise of 7.14 per cent but below market expectations of 7.38 per cent.

Banking stocks which have been performing well on account of good earnings reports got a shot in the arm after market discounted fears of a possible repo-rate hike in the Reserve Bank of India���s annual policy meet on Tuesday.

���Market took the inflation figures positively as its eases concerns of a repo-rate hike by the RBI next week. Also, so far no major write-downs were announced by banks on account of derivative losses which helped the sentiment,��� said a research analyst with a local brokerage.

However, Chandana Jha, banking analyst, PINC, believes the ���rally in the banks has more to do with better than expected quarterly results.���

AXIS Bank's net profit rose 70.56 per cent to Rs 361.40 crore for the quarter ended March 2008 while income grew 56.57 per cent to Rs 2571.90 crore. Similarly, HDFC Bank reported 37 per cent increase in net profit at Rs 471 crore for the period. ���ICICI Bank will be announcing results and we expect it to beat market estimates,��� the analyst added.

The largest private sector bank will be announcing results for quarter ended March on Saturday. Shares of ICICI Bank today ended 4.54 per cent higher at Rs 916.15.

Other major scrips to take a lead were State Bank of India (up 4.01%), HDFC Bank (3.59%), Bank of Baroda (2.85%) and Yes Bank (2.26%).