Banking shares pare early gains as rupee crosses 64 mark

The BSE banking index, Bankex up 94 points, has lost nearly 533 points from intra-day high.

Banking shares were trading lower by up to 4% erasing their early morning gains after the Indian rupee crossed the 64 mark in noon deals today.

Union Bank of India, Bank of India, Canara Bank, Federal Bank and Kotak Mahindra Bank were trading lower by 2-4% on the Bombay Stock Exchange (BSE) at 1401 hours.

YES Bank was trading higher by 5% at Rs 255, declining 10% from day’s high. Shares of the private sector bank hit a high of Rs 284 in morning trades. State Bank India was down 1.2% at Rs 1,535, falling nearly 7% from intra-day’s high of Rs 1,650.

The BSE banking index, Bankex was up 94 points and has lost nearly 533 points from intra-day high. The index was quoting at 10,605, after hitting a high of 11,138 in early morning trades.

The rupee was at 63.9725 versus Tuesday's close of 63.23. The rupee hit low of 64.10 and high of 63.115 so far.

Most of these stocks rallied between 7-15% after the Reserve Bank of India (RBI) has decided to allow banks to transfer SLR (statutory liquidity ratio) securities to HTM  (Held to Maturity) category from available for sale (AFS) / held for trading (HFT) categories up to the limit of 24.5% as a one-time measure.

In addition, RBI has also allowed the banks to spread over the MTM (mark to market) losses on the remaining AFS/HFT book over the next three quarters equally.

Analyst at Angel Broking believe that these measures are only sentimentally positive for the banks, other basic fundamental negatives remains largely unchanged except for the RBI intention to not let long term yields go too high.