Mumbai, Feb. 22: Markets went cock-a-hoop today over the new policy giving banks a free run in acquiring peers, setting up arms and closing weak branches.
The sensex ended a five-session losing streak to close at 6589.41 compared with Monday's finish of 6534.68 in an increase of 54.73 points, or around 0.84 per cent.
The move towards bank reforms gave the market another pointer to a budget that would push the process of liberalisation forward in several sectors of the economy.
For banks, the expectation is that finance minister P. Chidambaram will shrug off Left parties' objections to raise the level of foreign direct investment and lift the 10 per cent cap on voting rights for overseas investors.
While most analysts felt the new norms would boost banks' profits in the long run, many doubted if the greater leeway allowed in acquisitions would be used now.
Dena Bank chairman and managing director A. K. Khandelwal welcomed the move, saying it was a positive step in the process of creating a level-playing field. He also saw it as a signal that the government wanted to get out of the business of micro-managing banks. 'Earlier, we even needed government permission for a general manager's post. Now banks can do this on their own. This is a good augury,' he added.
Union Bank of India chief K. Cherian Varghese said the autonomy charter would bring out the best in public sector banks. However, Varghese, whose bank is believed to be in talks to merge with Bank of India, felt such decisions will have to be taken by the partners.
Back on the bourses, foreign institutional investors (FIIs), which pumped Rs 2304.60 crore into equity last week, were big buyers of bank shares. The rally was also fuelled by signs of a smooth roll-over in the futures segment on Thursday, when February deals will be squared up.
Though the mood was upbeat for much of the day, the optimism peaked in the last few minutes of trading, when the full extent of the bank autonomy package sunk in. This led to a spike in the sensex after 3 pm. BSE's bankex was stronger by 59.69 points at 3792.87. The broad-based BSE-100 index recovered 30.04 points to finish at 3550.88 compared with its last close of 3520.84.
SBI's was the top traded share with a turnover of Rs 145.44 crore. The stock closed at Rs 680.95 in a gain of Rs 20 over its previous finish; it opened at Rs 661 and peaked at Rs 685.90. Bank of Baroda closed at Rs 207.20, Vijaya Bank at Rs 64.45 and Corporation Bank at Rs 353.70.
The volume of business on Dalal Street remained thin with turnover falling sharply to Rs 1698.47 crore. Among the non-bank shares, Reliance Industries had a turnover of Rs 73.31 crore, Tata Steel Rs 70.82 crore, Maruti Udyog Rs 46.64 crore and Satyam Computers Rs 40.52 crore. In the specified group of BSE, 114 shares, including 22 from the sensex, logged sharp to moderate gains.