COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

RBI policy impact: bank, FI shares take a dip; revival is not far away, says study

Shares of the financial institutions and banks registered a decline immediately after the announcement of the Reserve Bank of India's half-yearly monetary and credit policy on October 30.

According to a study conducted by a securities research firm, scrips like IDBI, State Bank of India, Bank of Baroda, Corporation Bank and ICICI which are representing the banking sector on the Indian bourses, registered moderate decline during last three days. The slump is being attributed to the various recommendations of the RBI for the banking sector.

Jignesh Shah, assistant vice-president (research) at Triumph International Finance India Limited, said that the credit policy has focussed on maintaining the quality of the assets of the financial intermediaries, subsequent to the south east Asia imbroglio. The RBI has tried to put some qualitative checks on capital adequacy ratio.

According to him, this may affect a few of the banks/institutions like IDBI and SBI. Overall, this may affect the sentiment for this sector in near term. But after some time the investors would realise the oversold position in these scrips. Then the positive aspect of the measures announced would become apparent and investors would once again revert back to these scrips for investment.

Evidently, the primary effect of the credit policy announcement has been as per expectations. Moreover, the expected adverse announcement about non-performing assets has not come in this credit policy, protecting the scrips from major selling pressure.

State Bank of India which was quoting at above Rs 160, went down to Rs 149 after the credit policy announcement. Bank of India which was quoting at around Rs 22, slided to Rs 20. Bank of Baroda slumped from Rs 56.50 to Rs 52. Corporation Bank slided from Rs 100 to Rs 92, IDBI from Rs 39.40 to Rs 35.40, and ICICI from Rs 42.10 to Rs 39.55.

UNI

The RBI's Credit and Monetary Policy 1998-99

Today's business stories