Banks, financial shares dip as RBI squeezes liquidity

SBI, Yes Bank, IndusInd Bank, ICICI Bank, BoB, IDFC, M&M Financial Services and Power Finance Corporation are down more than 5% each on NSE.

Banking stocks declined by about 5% on Tuesday after the RBI decided to raise short-term borrowing rates to cap currency volatility. Market analysts said that an interest-rate cut in the RBI policy review later this month looks unlikely for now.

The currency has seen a sharp fall of about 11% since June this year as the US economy showed signs of improvement strengthening the dollar. Rupee slid to Rs 61.2 agianst the dollar at its lowest. Analysts said that the central bank would look at stabilising the currency before it goes for further rate-cuts.

“Till the rate-cut becomes a reality, these stocks will continue to see more pain,” said a banking analyst with a foreign brokerage.

The BSE Bankex and the NSE Bank Nifty were down 4.6% each during Tuesday morning’s trading session. The decline was led by private sector bank stocks like Yes Bank, IndusInd Bank and Axis Bank.

Among the Bankex stocks, Yeas Bank saw the highest decline of about 8.5%, followed by Canara Bank at 6.9% and IndusInd Bank at 6.8%.

On Tuesday, the broader market benchmark indices were also down by about one%. The BSE Sensex was trading at 19794, down 240 points or 1.2% from its previous close. The NSE Nifty was trading at 5945, down 85 points or 1.4%.