As meltdown rocks financial circles, Indian bank scrips nosedive

Mumbai, Oct 10 : Banking sector stocks, led by the heavyweight ICICI Bank, skidded on the Bombay Stock Exchange (BSE) Friday following frantic offloading by overseas investors and nervous selling by retail investors.

"Banks are proxy of our nation's economy. Any crisis in the banking sector will be reflected in the entire industry," said Religare Securities president Amitabh Chakraborty.

However, Chakraborty said while there was a severe liquidity crunch in the system, the cash reserve ratio (CRR) cut announced Monday and Friday by the central Reserve Bank of India by 150 basis points in two tranches will lift some pressure off the banks.

The twin CRR cuts are expected to infuse some Rs.600 billion into the system.

During the day, the ICICI scrip fell by over 26 percent to Rs.326 on the Bombay Stock exchange on fears that its exposure to the recent financial crisis might hurt its earnings.

Axis Bank nosedived 15.64 percent to fall to Rs.543, while HDFC lost 5.93 percent to Rs.1,040.

Khandelwal Securities head of research Ashok Jainani told IANS: "The alarming fall in the banking sector is due to acceleration of FII outflows amid fear of credit crisis in the West."

However, Jainani said he saw no problem on the domestic economic front.

Echoing a similar sentiment, IDBI Capital CEO and managing director Narendra Bhatanagar said: "The Indian Banking sector is capitalised, compared to its foreign counterparts. In spite of the global turmoil, some state-owned banks are in the green."

India's largest commercial bank, the State Bank Of India, was trading Rs.1,361 in mid-day trade, up almost 41 points while Canara Bank was up 4.44 percent to Rs.174.

--IANS