Banking stocks had a mixed reaction to the Reserve Bank of India's move to raise short-term borrowing and lending rates on Thursday, with the State Bank of India (SBI) and ICICI Bank extending their gains on the Bombay Stock Exchange, while HDFC Bank and IDBI Bank were in the red.
While some banking stocks reacted positively to the announcement, most of them witnessed a negative trend, with private sector lender HDFC Bank registering a sharp decline.
The RBI raised its short-term lending rate by 25 basis points and short-term borrowing rate by 50 basis points to check rising prices. It had in July also raised these key rates by a similar percentage.
HDFC Bank, which scaled a new high of Rs 2,384 in early trade on Thursday, lost ground following the action and was trading 0.19 per cent lower than its previous close at Rs 2,371.80.
However, the country's largest lender, State Bank of India (SBI), rose 1.67 per cent to Rs 3,111.80, to emerge as the best performer in the Sensex-30 pack.
"The increase in rates was above market expectations and an aggressive approach from RBI. The government is targetting inflation rather than overall growth," Ashika Brokers Research Head, Paras Bothra, said.
Mortgage lender HDFC also fell from its all-time high of Rs 686 to Rs 682 within minutes of trade. Another private sector player, ICICI Bank, was trading in the green with a gain of 0.72 per cent, at Rs 1,106.70.
Among other banking stocks, IDBI Bank was down 0.11 per cent. Bank of Maharashtra was being quoted 0.84 per cent lower on the BSE. In contrast, Punjab National Bank rose 1.79 per cent and Central Bank of India gained 2.27 per cent.
Reacting sharply to the development, the stock market benchmark Sensex plunged 113 points to hit a low of 19,388.65.
However, the market soon recovered and the Sensex was trading at 19,516.04, up 13.93 points in afternoon trade.