Mumbai: Shares rose 0.6% on Thursday tracking firm Asia and largely shrugging off a federal agency probe into a corporate loans bribery case, the scope of which is seen limited to some bank and financial officials.
The shares of the companies named in the bribery scandal traded mixed, but the banking sector index was up 0.2% as the overall investor sentiment remained intact.
On Wednesday, eight top officials from banks and financial firms were arrested by the federal investigation agency on charges of taking bribes to grant corporate loans.
After the market closed on Wednesday, the Central Bureau of Investigation said those arrested included the chief executive of LIC Housing Finance and senior officials at state-run Central Bank of India, Punjab National Bank and Bank of India.
At 12:12pm, the 30-share BSE index was up 0.60% at 19,576.10 points, with 16 of its components advancing. The 50-share NSE index was up 0.4% at 5,890.20 points.
“It is an issue. But here, the bank officials are under scanner and not the ministers or other top guys,” said Prakash Diwan, head of institutional business at Networth Stock Broking.
LIC Housing Finance rebounded 0.3% after falling as much as 11.5% earlier, while Central Bank of India rose 4.8%.
Analysts said they were still to ascertain the full impact of the development on the banks and the financial firms.
Private finance firm Money Matters Financial Services dropped 20%, while Punjab National Bank and Bank of India declined 3% and 2.3% respectively.
“There was a knee-jerk reaction in prices of the companies under scanner. But, this one will not make a big impact to the market at large,” Diwan said. “It does not look like there could be bigger skeletons hidden in the closet.
Citigroup said in a note it believed the financial implications may not be materially large, as most of these loans would possibly be backed by real assets.
“However, we believe the impact on perception/sentiment will be larger and will likely lead to some derating of the entire PSU (public sector undertaking) banking sector (especially the ones that are named in this),” the note said.
“We continue to prefer the likes of HDFC Bank, Axis Bank, ICICI Bank and in addition SBI.”
State Bank of India and Axis Bank were down 0.7% and 1.1% respectively, while ICICI Bank and HDFC Bank gained 1.6% and 1.8% respectively.
In the broader market, losers led gainers in a ratio of 1.5:1 on a volume of 195 million shares.
Volatile trading is expected towards market close as monthly derivatives contracts expire on the National Stock Exchange.
Elsewhere, the MSCI’s measure of Asian markets other than Japan and Japan’s Nikkei rose 0.5% each.
Suzlon Energy, developers Lavasa Corp, and DB Realty were among companies named by India’s federal investigating agency in a bribery scandal that led to arrests of eight top officials of banks and financial firms, media reports said.
Suzlon Energy, DB Realty and Lavasa parent Hindustan Construction Co dropped between 3.3% and 10%.