Banks fare badly, Sensex dips 95 points

Indian stocks fell, led by lenders including ICICI Bank on speculation earnings for the quarter ended March 31 will be eroded because of the decline in capital markets and real estate.

"Indian banks' exposure to the capital market and real estate sectors has increased significantly in the past two years," analyst Aashish Agarwal at CLSA Asia-Pacific Markets said in a note to clients. "The recent fall in equity markets will likely hit fourth-quarter profits."

Reliance Energy rose after the company said it has spent about a third of the Rs 800 crore allocated for buying back shares from the stock market.

The Bombay Stock Exchange's Sensitive Index, or Sensex, declined 95.41, or 0.6 per cent, to 15,695.10 at the close in Mumbai. The S&P CNX Nifty Index on the National Stock Exchange fell 14.05, or 0.3 per cent, to 4,733.

ICICI, the nation's second-largest lender, fell Rs 35.55, or 4.3 per cent, to 800.95. State Bank of India, the largest, declined Rs 31.65, or 1.9 per cent, to 1,661.85. HDFC Bank, the third-biggest by market value, slid Rs 50.50, or 3.7 per cent, to 1,325.55.

Some banks had doubled their capital-market exposure in the last two years to about 20 per cent of their net worth as of March 2007 and had increased it further by December, CLSA said in the note.

Banks had also more than doubled their real-estate loans, most of these being against commercial real estate or to housing finance companies, according to the note.

Reliance Energy, the third-worst performer on the Sensitive Index this year, rose Rs 76.45, or 6.5 per cent, to 1,253.35, the biggest gain in more than two weeks.

India's third-biggest utility by market value bought back 176,871 shares yesterday, taking the total shares acquired so far to 2.04 million shares since the offer started on March 25.

"We remain positive on Reliance Energy, as we believe the stock's recent underperformance presents a good buying opportunity," analyst Parag Gupta at Morgan Stanley said in a note to clients.

Morgan has set a price estimate of Rs 1,779 a share, a 55 per cent increase from the closing price on April 8 and 42 per cent from Thursday's close.

RIL, the nation's largest company by market value, climbed Rs 49.65, or 2.1 per cent, to 2,467.70, on a report it may sell a 10 per cent stake in a natural gas field in Krishna Godavari basin area.