Banking shares under pressure on disappointing IIP, CPI numbers

At 0935 hours, the NSE Bank Nifty was down 1.5% compared to 0.50% fall in CNX Nifty.

Banking shares are under pressure, trading lower by up to 3% in early morning deals on concerns that the Reserve Bank of India (RBI) is likely to hike the repo rate during its upcoming monetary policy review after a sharp spike in retail inflation and a worse-than-expected contraction in industrial production.

The National Stock Exchange (NSE) banking share index, Bank Nifty was down 1.5% compared to 0.50% decline in benchmark CNX Nifty at 0935 hours.

Among the individual stocks ICICI Bank, IndusInd Bank, Bank of Baroda, Yes Bank and Axis Bank are down 2-3%, while Union Bank of India, Bank of India, Punjab National Bank and Canara Bank are trading lower by 1-2%.

As per Quick Estimates on the Index of Industrial Production (IIP), industrial growth in October 2013 reported contraction of 1.8% as compared to growth of 2.0% in the previous month and 8.4% in October 2012. The industrial production for October 2013 surprised negatively by coming in lower than market expectations of a 1.2% decline.

We expect that with containing of inflationary pressures and expectations as its priority, the RBI is likely to hike the repo rate by 25bp during its upcoming monetary policy review on December 18, says analyst at Angel Broking in a client note.