Banking shares recover

Banking shares recovered sharply on expectations that the meltdown in US market may prompt US Federal Reserve to cut interest rate to 1.75% from 2%.

BSE's banking sector index Bankex outperformed the Sensex, rising 0.72% at 6,840.60. The index recovered from a low of 6,503.21. The BSE Sensex was down 54.38 points, or 0.43%, to 13472.66.

Canara Bank (up 6.77% at Rs 217), Axis Bank (up 6.35% at Rs 699), Indian Overseas Bank (up 6.24% at Rs 100.50), State Bank of India (up 4.76% at Rs 1,559.70), and HDFC Bank (2.76% at Rs 1,237.25), spurted.

India's largest private sector bank by assets ICICI Bank was down 6.43% at Rs 587.55 on reports the bank may have about $200 million in losses tied to the credit market turmoil.

According to reports, there is a three-in-four chance the Fed will cut the benchmark fed funds rate in order to spur the US economy struggling under credit market turmoil on top of a slumping real estate market, lower domestic demand and rising unemployment. US Federal Reserve will hold a regular policy meeting later today, 16 September 2008.

The BSE bankex had outperformed the market over the past one month till 15 September 2008, falling 1.61% compared to the Sensex’s 8.10% fall. It had also outperformed the market in the past one quarter, falling 3.74% compared to Sensex’s 10.92% fall.