Banking shares surge on rate cut hope

Canara Bank, Bank of Baroda, Karnataka Bank and Union Bank of India are trading higher between 4-5% on BSE.

Banking shares have rallied up to 5% on the bourses on hopes of rate cut in the Reserve Bank of India’s (RBI) annual policy on May 3 after the wholesale price index (WPI) inflation down to 40-month low.

Canara Bank, Bank of Baroda, Karnataka Bank and Union Bank of India are trading higher between 4-5% on the Bombay Stock Exchange (BSE).

State Bank of India, Dena Bank, Bank of India, Yes Bank, Oriental Bank of Commerce, Allahabad Bank, Punjab National Bank and Uco Bank are up 3-4%.

The BSE banking index Bankex has surged 217 points or 1.66% compared to 0.91% rise in benchmark Sensex at 1324 hours.

The WPI inflation fell to 5.96% in March 2013, its lowest recorded figure in 40 months.

"The softening of headline WPI inflation to a 3 year low can mainly be attributed to cooling down of primary articles (particularly food) inflation. Owing to the positive trend in inflation, we believe there is scope for a 25bp rate cut in the RBI’s annual policy on May 3. But we maintain some caution in reading this data due to the upward revisions in the provisional numbers,” says Ms. Bhupali Gursale, Economist - Angel Broking.