Money on the markets

A maturing market amid the mayhem

Banking stocks fall

June 8, 2010


The BSE Banking Index fell 1.1 percent on Tuesday in a broader market that slipped nearly 1 percent on worries over the euro zone debt crisis.

Financials also reacted to RBI Deputy Governor Subir Gokarn’s comment that the central bank would continue tightening monetary policy at a steady pace.

The RBI has raised benchmark rates twice by a total of 50 basis points since March, after inflation hit a 17-month high of 9.9 percent. It had earlier lifted reserve requirements of banks, saying it preferred to use tools that had predictable effects on liquidity.

The fall in the Bankex was led by top private sector lender ICICI Bank, which ended 3 percent lower. HDFC Bank fell 1 percent while Kotak Mahindra Bank dropped 1.8 percent.

For the year, HDFC Bank shares have surged over 9 percent, while ICICI Bank has dropped 6 percent. The Banking Index has gained more than 4 percent over the same period.

Do you think mounting inflation and tightening monetary policy will impact banking stocks?

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