Banks bullish, Sensex stays flat

Shares of banks have seen significant gains in the past two weeks on the expectations that the banking amendment bill will be cleared in the Parliament soon.

Shares of banks have seen significant gains in the past two weeks on the expectations that the banking amendment bill will be cleared in the Parliament soon. Bombay Stock Exhange's Bankex, the index of 14 major bank stocks, has risen 8 % in the last 14 trading sessions outpacing the Sensex which has gained 5% in the period.

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"Banking stocks have gained in the past few days on the anticipation that the banking amendment bill will be passed in the parliament in few days," said Kajal Gandhi, banking analyst, ICICI Securities. "Increasing the voting right for share holders is positive for banks," she said.

The Banking Laws (Amendment) Bill, currently being discussed in the Lok Sabha, proposes to increase the voting rights of shareholders in public and private sector banks and allow issuance of bonus shares and rights shares and pave the way for entry of new banks.

On Tuesday Bankex closed at 14176 showing a marginal fall of 0.3% and Sensex closed at 19387, a decline of 23 points or 0.1%.

Meanwhile, the Bankex had closed at 13156 on November 21 while Sensex had ended at 18,460.

The banking bill also seeks to accord higher regulatory powers to the Reserve Bank of India (RBI) to supersede the boards of banks and control associate companies of banks engaged in financial business.

The RBI had said in the past that it requires power to supersede the board of banks before issuing new bank licences.

"The proposal of RBI superseding the board of banks and controlling associate companies may disappoint banks but it is good for Indian banking system," said a senior bank official.