Banking shares turns volatile post RBI policy

ICICI Bank, IndusInd Bank, Federal Bank, BOI and Kotak Mahindra Bank are down by 1% each, falling nearly 2% from their respective intra-day highs.

Banking shares have turn volatile after the Reserve Bank of India (RBI) maintained status quo on key interest rates in its bi-monthly review of the Monetary Policy today. However, the apex bank has slashed the Statutory Liquidity Ratio (SLR) by 50 basis points to 22%.

The National Stock Exchange (BSE) banking share index, Bank Nifty opened at 15,284 levels but dipped 138 points, or 1%, to 15,146 after the policy announcement. However, the index has erased its entire losses and is trading 0.47% or 72 points higher at 15,314 in noon deals.

At 1237 hours, Bank Nifty hit fresh intra-day low of 15,106, plunged 1.5% or 238 points from intra-day high of 15,344 on NSE.

Among the individual stocks, ICICI Bank, IndusInd Bank, Federal Bank, Bank of India and Kotak Mahindra Bank are trading down by 1% each, falling nearly 2% from their respective intra-day highs. However, Bank of Baroda, Punjab National Bank and HDFC Bank are up less than 1% each.

“RBI highlights that risk to inflation is more balanced than the situation in June, however re-iterated that the risk to target of 6% by 2016 are on upside. Policy appears to be hawkish than June statement but in near term it will align the expectation of early rate cuts to gradual ones,” says Kunal Shah, Fund Manager - Debt, Kotak Mahindra Old Mutual Life Insurance Limited.

We expect current disinflation process to continue and core inflation to moderate further however sharp fall is unlikely in short-term given weak start of monsoon, he adds.