Fourteen bank shares fell by 1.01% to 4.76% at 11:50 IST on BSE as inflation rates continued to accelerate in September 2013, fuelling concerns of further monetary tightening from the central bank.
Yes Bank (down 4.76%), Bank of India (down 4.16%), Canara Bank (down 3.24%), IndusInd Bank (down 3.11%), Union Bank of India (down 2.82%), Federal Bank (down 2.19%), IDBI Bank (down 2.11%), Punjab National Bank (down 1.93%), Axis Bank (down 1.9%), Kotak Mahindra Bank (down 1.83%), Bank of Baroda (down 1.59%), ICICI Bank (down 1.43%), HDFC Bank (down 1.17%) and State Bank of India (down 1.01%), edged lower.
The S&P BSE Bankex was down 1.65% at 11,953.39. It underperformed the S&P BSE Sensex, which was down 0.40% at 20,525.29.
The S&P BSE Bankex had outperformed the market over the past one month till 14 October 2013, rising 4.88% compared with the Sensex's 4.43% rise. The index had, however, underperformed the market in past one quarter, faling 9.13% as against Sensex's 3.25% rise.
Bond prices declined after data released by the government after trading hours on Monday, 14 October 2013, showed that consumer price inflation accelerated in September 2013, adding to concerns that the central bank is likely to increase its main lending rate viz. the repo rate again. The yield on the benchmark federal paper 7.16% GS 2023 was hovering at 8.6548%, higher than its close of 8.5747% on Monday, 14 October 2013. Lower bond prices will result in diminution in value of bond holdings by banks. Bond yields and bond prices are inversely related.
The annual rate of inflation based on the combined consumer price index (CPI) for urban and rural India rose 9.84% in September 2013, from 9.52% in August 2013. The CPI inflation for rural and urban areas rose 9.71% and 9.93% in September 2013, respectively. Inflation rates (final) for rural and urban areas for August 2013 were 8.93% and 10.32% respectively. The headline CPI (combined) has seen a rise of 1.19% (m-o-m) in September 2013.
Data released by the government during trading hours on Monday, 14 October 2013, showed that inflation based on the wholesale price inflation (WPI) accelerated to a seven-month high in September 2013. Increase in WPI inflation in September 2013 was mainly driven by surge in inflation for crude oil and non-food primary articles viz. fibres and oilseeds. Core inflation accelerated to 2.06% in September 2013 from 1.97% in August 2013. Inflation for July 13 was revised upwards to 5.85% from 5.79% reported earlier.
The Reserve Bank of India (RBI) announces Second Quarter Review of Monetary Policy 2013-14 on 29 October 2013.
RBI raised its key policy rate viz. the repo rate by 25 basis points (bps) to 7.5% from 7.25% after mid-quarter review of the monetary policy on 20 September 2013. The central bank kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4%.
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