Banks spiral as Parliament to debate sector reforms
Banks witnessed a broad-based surge for the second day in a row today.
ICICI Bank was up 4% to Rs 917, HDFC Bank was up 3.9% to Rs 1,120, and State Bank of India rose 3.3% to Rs 1,217.BSE’s banking sector index, Bankex, has surged since the beginning of this month. ICICI Bank and HDFC Bank have contributed immensely to this advance. PSU banks joined the fray on Wednesday. From 6,427.70 on 7 November, the Bankex had surged almost 10% to 7,060.23.
Banking stocks hope that the government will push the reforms process in banking during the upcoming winter session of Parliament. The winter session will debate, among other things, the Banking Regulation (Amendment) Bill. The Bill proposes to increase the voting rights of foreign stakeholders in private banks, which is capped at 10% now. However, the Left parties are opposed to amendment to the Banking Regulation Act, fearing that increase in voting rights in private sector banks will lead to a takeover of these banks by foreign entities.
Strong results from banks on the back of high credit growth and expectations of continuation of the growth in earnings, have also aided the surge in bank stocks over the past few days. Credit growth has been high at over 30%, forcing the RBI to hike its benchmark repo rate by 25 basis points in its monetary policy last month.
What has also aided positive sentiment towards banking shares, is the freedom given to banks to raise capital innovatively through instruments like hybrid capital and perpetual bonds. In a notification dated July 21, RBI had allowed banks to augment their capital funds by issuing innovative perpetual debt instruments (IPDI), qualifying as tier I capital, and debt capital instruments, qualifying as upper tier II instruments.
Stock specific news also aided the surge. Reports on Wednesday said RBI had lifted the ban on ICICI Bank for opening new branches and ATMs, with possibility of other IPO-scam tained banks, like HDFC Bank, also expected to earn the goodwill of the central bank in this regard.
ICICI Bank was up 4% to Rs 917, HDFC Bank was up 3.9% to Rs 1,120, and State Bank of India rose 3.3% to Rs 1,217.BSE’s banking sector index, Bankex, has surged since the beginning of this month. ICICI Bank and HDFC Bank have contributed immensely to this advance. PSU banks joined the fray on Wednesday. From 6,427.70 on 7 November, the Bankex had surged almost 10% to 7,060.23.
Banking stocks hope that the government will push the reforms process in banking during the upcoming winter session of Parliament. The winter session will debate, among other things, the Banking Regulation (Amendment) Bill. The Bill proposes to increase the voting rights of foreign stakeholders in private banks, which is capped at 10% now. However, the Left parties are opposed to amendment to the Banking Regulation Act, fearing that increase in voting rights in private sector banks will lead to a takeover of these banks by foreign entities.
Strong results from banks on the back of high credit growth and expectations of continuation of the growth in earnings, have also aided the surge in bank stocks over the past few days. Credit growth has been high at over 30%, forcing the RBI to hike its benchmark repo rate by 25 basis points in its monetary policy last month.
What has also aided positive sentiment towards banking shares, is the freedom given to banks to raise capital innovatively through instruments like hybrid capital and perpetual bonds. In a notification dated July 21, RBI had allowed banks to augment their capital funds by issuing innovative perpetual debt instruments (IPDI), qualifying as tier I capital, and debt capital instruments, qualifying as upper tier II instruments.
Stock specific news also aided the surge. Reports on Wednesday said RBI had lifted the ban on ICICI Bank for opening new branches and ATMs, with possibility of other IPO-scam tained banks, like HDFC Bank, also expected to earn the goodwill of the central bank in this regard.
posted by SY at 4:46 PM
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