Bank shares fall as RBI holds rate steady

Dalal Street suffered sharp loses in afternoon trade as the sentiment was dampened by the Reserve Bank of India move to keep key rates like repo rate, reverse repo rate, bank rate and cash reserve ratio unchanged in its quarterly monetary policy review. After an early surge, bank shares reeled under heavy selling following the RBI move, pulling the BSE Bankex down by 3.48 per cent. State Bank of India (down 3.54 per cent), HDFC Bank (down 3.77 per cent) closed lower. ICICI Bank, which lost 3.90 per cent, was the top loser from Sensex pack. “Investors had built up positions in bank stocks anticipating a cut in rates. Now that it has not happened, they had left their positions,” said a BSE dealer.

The banking industry was eagerly looking for some signals from the RBI to reduce lending and deposit rates, may have to wait longer to decide on the issue. “Maybe the RBI would review the key rates in its April policy and we would also review them accordingly,” said KC Chakrabarty, chairman & managing director, PNB. Shares of mid-cap banks also suffered losses. Centurion Bank of Punjab (down 2.30 per cent), Syndicate Bank (down 3.10 per cent), Bank of India (down 6.91 per cent), Oriental Bank of Commerce (down 6.13 per cent) slipped on selling. Other interest rate sensitive sectors like realty and auto were also down. DLF (down 0.75 per cent), Unitech (down 5.69 per cent) and Parsvnath Developers (down 0.81 per cent) declined from the real estate pack. Housing and auto loans have witnessed a slowdown in growth due to high rates prevailing in the system. Sensex fell by by 61 points or 0.34 per cent at 18,091.94. The Sensex had risen 338 points at one stage before selling pulled down the market. Experts ruled out any big impact on the bond market. “The RBI is in wait and watch mode but is not hurry to pare rates. Local bond yields could tighten a tad but a major sell-off in bonds seems unlikely. Local markets will take cues from global markets and are the ten year bond yield is likely to be in the 7.45-7.55 range,” saidAbheek Barua, chief economist, HDFC Bank.