Banking shares are continue under pressure second day in a row after the Reserve Bank of India (RBI) announced a slew of measures to address exchange rate volatility post market hours on Monday.
Union Bank of India, YES Bank, Oriental Bank of Commerce and Federal Bank are down more than 2%, while State Bank of India (SBI), ICICI Bank, HDFC Bank, Syndicate Bank, Vijaya Bank, IndusInd Bank and IDBI Bank are down 1-2% on the Bombay Stock Exchange (BSE).
The BSE banking index Bankex, the largest loser among the sectoral indices, is down 1.4% as compared to 0.29% rise in benchmark Sensex at 1155 hours. On Tuesday, Bankex has tanked nearly 5% against less than 1% fall in benchmark index.
The RBI took measures to tighten liquidity to defend the rupee. The measures included changes to Liquidity Adjustment Facility, increases in some interest rates and open market operations.
According to market experts the move may push up cost of borrowings for banks.
“Financial companies that are dependent on short-term wholesale funding are expected to be the most impacted by the Central Bank's measures to curb liquidity” says Sanjeev Zarbade, Vice President- Private Client Group Research, Kotak Securities.
Commenting on the same, Amar Ambani, Head of Research at IIFL, feels this move will hurt the stocks of banking and non-banking financial companies materially.
"Apart from hurting margins through higher borrowing cost, it may impact credit growth and asset quality. Increase in yields of long-dated government securities could spell treasury losses for some banks. In our view, wholesale-funded banks and NBFCs would be more adversely impacted as they may witness higher margin contraction," he stated.
According to Ambani, Yes Bank, IndusInd Bank, Axis Bank, ICICI Bank, LIC Housing Finance, Mahindra Finance and Shriram Transport Finance Company are likely to be hit adversely in the near term. However, all is not lost, he advises buying these companies in case of an over 7-8% further correction.
Meanwhile, Punjab and Sindh Bank, Federal Bank, Oriental Bank of Commerce and Indian Overseas Bank have hits 52-week lows on BSE today.
Union Bank of India, YES Bank, Oriental Bank of Commerce and Federal Bank are down more than 2%, while State Bank of India (SBI), ICICI Bank, HDFC Bank, Syndicate Bank, Vijaya Bank, IndusInd Bank and IDBI Bank are down 1-2% on the Bombay Stock Exchange (BSE).
The BSE banking index Bankex, the largest loser among the sectoral indices, is down 1.4% as compared to 0.29% rise in benchmark Sensex at 1155 hours. On Tuesday, Bankex has tanked nearly 5% against less than 1% fall in benchmark index.
The RBI took measures to tighten liquidity to defend the rupee. The measures included changes to Liquidity Adjustment Facility, increases in some interest rates and open market operations.
According to market experts the move may push up cost of borrowings for banks.
“Financial companies that are dependent on short-term wholesale funding are expected to be the most impacted by the Central Bank's measures to curb liquidity” says Sanjeev Zarbade, Vice President- Private Client Group Research, Kotak Securities.
Commenting on the same, Amar Ambani, Head of Research at IIFL, feels this move will hurt the stocks of banking and non-banking financial companies materially.
"Apart from hurting margins through higher borrowing cost, it may impact credit growth and asset quality. Increase in yields of long-dated government securities could spell treasury losses for some banks. In our view, wholesale-funded banks and NBFCs would be more adversely impacted as they may witness higher margin contraction," he stated.
According to Ambani, Yes Bank, IndusInd Bank, Axis Bank, ICICI Bank, LIC Housing Finance, Mahindra Finance and Shriram Transport Finance Company are likely to be hit adversely in the near term. However, all is not lost, he advises buying these companies in case of an over 7-8% further correction.
Meanwhile, Punjab and Sindh Bank, Federal Bank, Oriental Bank of Commerce and Indian Overseas Bank have hits 52-week lows on BSE today.
