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RBI turns dovish, but bank stocks tumble

RBI turns dovish, but bank stocks tumble
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First Published: Tue, Oct 25 2011. 01 08 PM IST

Updated: Tue, Oct 25 2011. 01 08 PM IST
Mumbai: Local markets seem to have shrugged off the 25 basis points interest rate hike by the Reserve Bank of India in its quarterly monetary policy review. After all, it was widely expected. But the initial surge in the markets – a factor of rising Asian markets and hopes of a solution to the Euro debt problem – soon dissipated. At 12:45 pm (local time), equities were barely trading up from the previous close, despite a dovish statement from the Central bank. With the bank also warning about the fiscal deficit leading to demand pressures, therefore there is nothing much for the markets to cheer.
Sensex – 16969.7, + 0.2%
Sure, the RBI says “the likelihood of a rate action in the December mid-quarter review is relatively low,” and has projected for inflation easing by December. But it has been wrong several times in the past and there is no guarantee of succor this time around. While the statement itself was less hawkish than seen in a long time, the big blow for banks came in the form of deregulation of savings account interest rates. The BSE’s Bankex index had lost close to 3% at the time of writing. HDFC Bank and Axis Bank, which have particularly strong savings and current account franchises lead losses as their margins are likely to suffer.
Bankex 10,747.27, -2.76%
HDFC Bank Rs455.3, -5.95%
Axis Bank Rs1,113, -4.77%
ICICI Bank Rs859.5, -9.8%
SBI Rs1,836, -71.2%
PNB Rs935.5, -35.8%
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First Published: Tue, Oct 25 2011. 01 08 PM IST
More Topics: Markets update | RBI | Banking | SBI | ICICI Bank |