Bankex: Softening inflation spurs bank stocks

SECTOR IN THE NEWS

Banking sector stocks were in demand after the wholesale price index (WPI) gave indication of a softening inflation rate. On Friday, the BSE Bankex outperformed the Sensex by reporting a gain of 6.27 per cent compared with 3.7 per cent for the Sensex.

On a weekly basis, the Bankex has appreciated 5.32 per cent, or 353.93 points, from 6,655.76 on August 22 to 7,009.69 now. On the other hand, the Sensex gained 1.13 per cent, or 163.04 points, from 14,401.49 to 14,564.53. The softening of inflation boosted hopes of the central bank keeping key lending rates unchanged in its next monetary review.

Bank of Baroda, Punjab National Bank, Canara Bank, HDFC Bank, Kotak Mahindra Bank and Axis Bank gained more than 6 per cent each. While, ICICI Bank, State Bank of India, Yes Bank, IDBI Bank and Corporation Bank appreciated in the range of 6 -12 per cent during the last one week.

Trading volumes in the mid-cap banking stocks such as Oriental Bank of Commerce, ING Vysya Bank, Federal Bank, J&K Bank, IndusInd Bank and Indian Overseas Bank more than doubled last week compared to the previous week. The market share of banking stocks to total trading volume increased marginally, from 5.65 per cent to 6.21 per cent in the last week.

In the derivative segment of the NSE September futures, the Bank Nifty rose 6.50 per cent on Friday on short covering. The front-line bank stock futures, such as HDFC bank, ICICI Bank and State Bank of India, moved up on fresh long build-up and covering of its earlier short position. Among the mid-size banking stocks, long build-up of over 300,000 shares each was seen in Bank of India, Allahabad Bank, Development Credit Bank and UCO Bank.

The September series of the Bank Nifty witnessed a decline in open interest by 79,950 shares on Friday, despite a sharp 88 per cent rise in open interest during the intra-day trade. State Bank of India added open interest of 2.14 million shares during the intra-day trade, but its carry forward position was modest at 282,480 shares. ICICI Bank too witnessed short covering on Friday as the carry forward open interest was marginally up by 12,600 shares despite an intra-day increase of 2.50 million shares.