The BSE Sensex scaling the magical 8,000-mark has turned banks cautious as far as increasing their exposure to the capital market is concerned. A zooming market is not a right option to park huge amounts, bankers feel. | |
| "The swift upward movement of the indices in a short span of time has turned extremely cautious. The market is running ahead of the fundamentals and hence, on a whole, we aren't optimistic," said Rusmik Oza, associate vice-president, BNP Paribas. |
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| The reason for the bankers' pessimistic stand is that they feel the domestic oil price hike, rising inflation and a weak rupee could be a drag on the economy. Most of them have a market exposure which is well below the Reserve Bank of India stipulated 5 per cent. |
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| HDFC Bank has a higher exposure since it was allowed by the central bank to breach the ceiling. Some of the public sector banks' capital market exposure is as low as 1-2 per cent. |
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| Moses Harding, executive vice-president, IndusInd Bank, said, "The Sensex spurt from 7,500 to 8,000 was unexpected. I do not know whether the market can sustain the 8000-plus mark or not, given the not-so-positive domestic factors such as the domestic oil price hike, rising inflation and a weak rupee. This will certainly affect corporate performance, which has been bullish for the past two years." |
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| Banks don't see their lending against shares getting affected as they already maintain around 50 per cent margin on loans against shares. Bankers said they would be concerned only if the market crashes to 6,000 points. |
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| Oza said, "We are selective and are not bullish across all stocks. I do not see banks increasing their equity exposure as of now as most inflows stem from foreign institutional investors, India-dedicated funds and mutual funds issuing initial public offerings (IPOs)." |
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| According to an official with a leading private bank, "If the indices continue to scale new heights, then lending margins will not witness any risk. The pressure on margins will increase only if the market falls. An upbeat market is a positive sign for both borrowers and lenders." |
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| Mihir Vora, head - equities, ABN Amro, said, "The figure 8,000 is important only from the sentiment point of view. We continue to focus on fundamentals and valuations. The June quarter profits have shown robust growth in most sectors with the exception of oil and gas. In the next few months, the markets will start looking not at March 2006 numbers but at March 2007 numbers. The market is trading at a P-E of around 14 times, which is not stretched given the growth in the Indian economy. The key factors that we are monitoring closely from the point of view of risk are interest rates, currency and oil prices." |
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