Banking stocks took a beating today and fell up to 4 per cent after rating agency,Moody's downgraded blue-chips,ICICI Bank,HDFC Bank and Axis Bank and higher than expected rise in inflation dashed hopes of investors betting on further rate cuts. Experts said the rating action by Moody's and the April inflation print of 7.23 per cent triggered a sell-off by the investors. Out of the over 24 public sector banks listed on the bourses,shares of over 20 PSBs fell. On the private sector side,14 counters ended the session with losses out of the 16 private banks listed on exchanges. Bank of Baroda was the top loser from the public sector space as it lost 3.72 per cent to settle at Rs 624.95. From the private banks space,Karnataka Bank was the biggest loser as it ended the day 3.91 per cent down over their previous close. Moody's downgraded - ICICI Bank,HDFC Bank and Axis Bank - to D+ from C- to align them with the sovereign rating. As a result,HDFC Bank fell by 2.02 per cent,ICICI Bank was down 1.7 per cent while Axis Bank shares fell by 0.69 per cent. Among the other blue-chips,State Bank of India (SBI) shed 0.65 per cent. All the 14 constituents of the BSE-Bankex fell today. Following losses in these counters,the BSE-Bankex ended 1.61 per cent lower at 10,661.64 points. Meanwhile,Moody's also downgraded the country's leading financial institution LIC following its recent investments in the oil and gas giant ONGC as well as a number of state-owned banks. "Most of the banks were seen into red due to higher inflation numbers thereby limited scope for RBI to cut interest rates and consequently most of the banks shrugged off early gains," Sharmila Joshi Head Equity Fairwealth Securities said. According to Bonanza Portfolio Research Analyst Shanu Goel: "Interest rate sensitive banking stocks reversed their initial gains on higher than expected inflation data. Moreover,reports of international agency Moody's downgrading three Indian banks also turned the sentiments negative for the sector." Inflation moved up to 7.23 per cent in April on account of spurt in prices of vegetables,meat,milk and pulses,although onion and fruits showed a declining trend. Inflation,as measured by the Wholesale Price Index (WPI),was 6.89 per cent in March. In April last year,it was 9.74 per cent. Shares of Corporation Bank,which closed 0.21 per cent up,was the only gainer from the PSB space. In the private banks space,J&K Bank and Karur Vysya Bank were the lone gainers.
