Bank shares hog limelight

[sajiv]

State Bank of India (up 0.82% to Rs 1297), ICICI Bank (up 1.75% to Rs 448.35), and HDFC Bank (up 2.51% to Rs 1011), edged higher as investors speculated falling bond yields and lower rates would accelerate loan growth and profitability

The BSE Bankex was up 1.59% at 5,457.36. It outperformed the BSE Sensex, which was up 0.70% at 9,635.71

Wholesale prices increased 6.61% in the year through 13 December 2008, lower than previous week's 6.84% rise, data released by the government a little while ago showed. The central bank's fiscal year-end target for inflation is at 7%.

Inflation had surged into double digits in early June this year after an increase in state-set retail fuel prices, and peaked at 12.91% on, 2 August 2008, the highest reading since annual numbers in the current data series became available in April 1995.

The sharp decline in inflation may provide further room for the Reserve Bank of India (RBI) to cut rates to shied the domestic economy from the global economic recession.

The RBI had on 6 December 2008, announced a 100-basis point cut in the repo rate and the reverse repo rate each. Repo rate is the rate at which RBI lends to commercial banks and reverse repo rate is the rate at which RBI accepts deposits from banks.