New Delhi, February 23: With speculation rife on mergers and acquisitions in the banking industry, punters have trained their guns on bank stocks. This can be discerned by the sharp increase in the volumes of most banking scrips on the Bombay Stock Exchange.Led by Bank of Baroda (BoB), as many as seven banks posted volumes of over one lakh compared with an average traded volume of a few thousand shares.
BoB's traded volume shot up to 1.93 lakh shares on Monday compared with less than 40,000 shares on Friday. The banking industry leader, State Bank of India, also witnessed a jump in volumes to 12.82 lakh shares, accompanied by a rise in price to Rs 249 from its Friday's close of Rs 241. Similarly, Bank of India saw 1.18 lakh shares changing hands on Monday against 39,100 shares at the end of the last settlement on the BSE. Even some private sector banks like Global Trust and HDFC Bank posted high volumes. While the former saw volumes of over 2.5 lakh, in the latter, almost 2 lakh shares were traded onFriday.
The reason for the sudden surge in volumes is attributed to a variety of reasons. One, BSE's decision to move some bank scrips to the specified list where carryforward is allowed. However, this does not explain why certain bank scrips in the B1 category have also seen a spurt in volumes. Take the case of Bank of Punjab.
The counter which saw only 900 shares change hands on Friday, recorded a volume of over 3,000 shares on Monday. Similarly, Bank of Rajasthan has seen its volumes surge from less than 400 shares to over 700 shares. Some analysts, therefore, feel that the surge in volumes which has accompanied a price rise in most cases has more to do with the acquisition and merger rumours going around in the banking circles. The Narasimham committee report has added fuel to fire as it has advocated mergers within the banking sector. The committee feels that mergers are necessary as small players will not survive the competition.
Yet another analyst is of the view that most of the bank stockshave little downside risks as they are already close to their 52-week lows.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
