Banking stocks rise on key rates hike

Banking stocks edged higher on the Bombay Stock Exchange (BSE) on Tuesday on fresh round of investments following the less-than-expected hike in policy rates by the Reserve Bank of India (RBI). State Bank of India, the nation’s largest lender, was up 2.19% to Rs2,076.20 in the afternoon trade, while the country’s top private lender ICICI Bank surged 2.04% to Rs938.65. HDFC Bank rose 0.87% to Rs1,952. Analysts said that markets reacted positively as the hike in rates by RBI was lower than expectations. “There were fears that hike in rates would be higher than announced. Dalal Street felt relieved and rate sensitive stocks have gone up after the announcement,” Bonanza Portfolio assistant VP Avinash Gupta said. The central bank hiked short-term lending and borrowing rates and the portion of money banks deposit with it by 25 basis points (bps) each, a move aimed at containing inflation without hurting growth. Punjab National Bank was higher by 1.07%, whereas Bank of India zoomed 2.30%. Other major gainers on the BSE include, Allahabad Bank (2.35%), Karnataka Bank (2.15%), Indusind Bank (1.76%) and HDFC (0.45%). The BSE benchmark Sensex shot up 150 points in afternoon trade and was quoting at 17,551.02. The apex bank hiked the repo and the reverse repo (overnight lending and borrowing rates) to 5.25% and 3.75%, respectively, while the Cash reserve ratio, or the portion banks park with the RBI, was increased to 6%.