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February 28, 2001                                       Feedback  

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Small savings rate cut boosts bank stocks

BS Banking Bureau

Banking stocks across the board rallied upwards following the announcement of a cut in small savings rate by 100 to 150 basis points.

This followed market anticipation of further reduction in bank rate and the cash reserve ratio (CRR). The proposal to jack up foreign institutional investors (FIIs) limit to 49 per cent also boosted stocks of ICICI and HDFC.

Corporation Bank and ICICI Bank stocks rallied sharply. The share price of Corporation Bank rose by 15.96 per cent to Rs 128.60 on the Bombay Stock Exchange, while that of ICICI Bank was up 14.41 per cent to Rs 177.40. The share price of HDFC Bank was up 2.77 per cent to Rs 257.85. Bank of Rajasthan scrip rose by 7.69 per cent to Rs 14.70.

Term-lending institution ICICI equally saw its shares moving up 14.74 per cent to Rs 108.60. The scrip rose following the proposal to hike FII limit to 49 per cent from the present 40 per cent.

HDFC scrip in contrast, moved up only marginally by 0.12 per cent despite an intra-day high of Rs 620 to close at Rs 593.55. Analysts pointed out that the housing industry failed to receive any major sops like soft line of credit which could have been extended to the National Housing Bank. The scrip shot up initially factoring in the hike in the FII limit.

The announcement to increase the number of debt recovery tribunals (DRTs) by seven from 22 saw share prices of public sector banks moving up, as this move would help them tackle their non-performing assets.

Dena Bank scrip shot up 13.4 per cent to Rs 11, while Bank of Baroda was up 6.91 per cent at Rs 62.70. State Bank of India shares moved up by 9.34 per cent to Rs 245. 75.

The rise in share price also reflected the impending cut in the bank rate and CRR following with reduction in small savings by 100 to 150 basis points.

Source: Business Standard

The Budget 2001-2002 Special
The Rediff-Business Standard Budget Special

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