ICICI Bank: Fear psychosis comes to rest

After a series of damage control measures, the ICICI Bank authorities seem to have dispelled all the negative impact of the malicious rumours
against it.

The stock which was down 20 per cent last week, is now up by 20.91 per cent on the NSE. Around 1pm, the volume of trading for ICICI in the F&O market is 1 crore 46 lakh while it is 2 crore 5 lakh in cash market.

If volumes are any indication (on Monday), investors are reposing faith on the bank once again. In the derivative market, the stock is being traded at a premium to the spot.

“Both volumes are good. In view of research reports by global agencies, the fear psychosis is over. It is worth investing in the stock. Buy at every decline,” said Alex Mathew, head – research, Geojit Financials.

In a press note, Standard & Poor's Ratings Services said today that credit fundamentals of ICICI Bank continue to be sound, backed by strong market position in the domestic banking industry, adequate financial profile, which is supported by its healthy capitalization, satisfactory loan quality, and diversification.

The overseas loan and credit derivative portfolio of the bank, including its overseas subsidiaries, is predominantly to Indian companies for their Indian and overseas operations and hence its quality is largely dependent on corporate credit quality and economic conditions in India, S&P Ratings Services adds.

The bank through its UK-based subsidiary also has a sizeable US$3.5 billion investment portfolio. This includes about $80 million exposure to Lehman Brothers.

According to S&P, likely credit or marked-to-market losses on its overseas exposure can be easily absorbed within its financial profile, considering the size of its balance sheet of about $100 billion and capital base of about $10 billion.

Currently, the bank has a capital adequacy ratio of 13.9 per cent as against SBI’s 12.6 per cent and HDFC’s 13.6 per cent. As per RBI norms, it is 9 per cent only.

In a press statement the CEO and MD of ICICI Bank said, "We (ICICI Bank) have evidence of organised attempts to destabilise the bank. But our bank, India's largest in the private space, is over-capitalised and is one of the strongest financial institutions in the world. We have not seen any drastic decline in deposits in the past few weeks

Sensex tumbles below 12000 - Rupee closes at 47.80 per dollar

The rupee slid to its lowest in more than 5-½ years on Monday as local shares dived nearly 6 percent, closing at 11801.70, triggering fears of an accelerated outflow of foreign funds, while dollar demand from importers and oil firms weighed. The partially convertible rupee ended at 47.80/81 per dollar, 1.5 percent weaker than its 47.0750/0850 at close on Friday. It slumped to 47.85 during the session, its lowest since Feb. 14, 2003.

The rupee has lost 17.6 percent so far this year. "The rupee was very volatile today, the Sensex was down. The dollar is stronger overseas. Importers and oil firms were buying dollars and there are no dollar inflows," said K.N.Reghunathan, a currency trader at state-run Union Bank of India.

"If this trend continues then we may see the rupee touch 49 against the dollar in the near-term," he added. India's main share index or Sensex ended down 5.8 percent as concerns grew of an acceleration in foreign fund withdrawals amid fears the credit crisis could lead to a global recession.