Mumbai, June 2: Has the banking bubble on bourses burst' Many answered in the affirmative at the end of a session when the flavour of the season turned putrid.
Bank shares went through the shredder after last week’s clarification from the finance ministry that no bank would be allowed to return equity to the government at par. They would have to fork out the going rate of the shares in the market if they wanted to do so.
Nationalised banks, many of which plan public issues, have been scrambling to give back a portion of the government’s equity to boost their share value.
An air of uncertainty hung over the issue in the past few days, created by a remark from a finance ministry official that the return of bank equity would be at par. The announcement triggered a spurt in the price of bank shares, particularly the state-owned ones.
Punjab National Bank wants to pay back Rs 130 crore, Bank of Baroda (BoB) Rs 91 crore, Indian Overseas Bank Rs 50 crore and Andhra Bank Rs 50 crore. Oriental Bank of Commerce has also unveiled similar plans, though it has not put a finger on the amount.
Punjab National Bank lost the maximum possible 20 per cent at Rs 143.55 after opening at Rs 162.45 and peaking at Rs 165. Bank of Baroda gave up 7 per cent to Rs 108.15 after opening at Rs 110.55, while Canara Bank shed more than 15 per cent at Rs 97.90. Oriental Bank of Commerce ended at Rs 123.50, down from Rs 134.95 on Friday. SBI, Vijaya Bank, Syndicate Bank, Indian Overseas Bank, Andhra Bank, Bank of India also floundered.
The blow to banks came even as key infotech shares, hardly the day-trader’s delight in recent months, bounced back. “Due to the confusion over the return of capital to the government, we may see money flowing back into infotech companies,” remarked a broker.
Infosys Technologies gained more than 5 per cent to close the session at Rs 2807.30; Satyam Computer Services shot up by more than 6 per cent to Rs 177.40. The rally helped the Bombay Stock Exchange sensex finish with a 25.63-point gain at 3206.38 over Friday’s 3180.75.
Opinions on how banks would fare this year were divided between those worried about the effect of the equity-return policy on balance-sheets, and a small section of operators concerned about a fall in treasury income. Then, there were optimists who felt banks are not out of steam yet, warning against writing them off early.