Date:25/10/2005 URL: http://www.thehindubusinessline.com/2005/10/25/stories/2005102502321500.htm

Back Oil marketing, auto stocks move up — Interest rate worries affect sentiment

Our Bureau

Kolkata , Oct 24

NERVOUSNESS about rise in interest rate and lower global crude prices left two contradictory effects on stock prices today. While the general sentiment turned negative on the apprehension that both repo and interest rates would be given an upward push, the crude oil price at a little above $60 a barrel worked in favour of oil marketing companies and some auto stocks.

According to Mr Arun Kejriwal, market analyst, the market showed nervousness on the fear that the mid-term Credit Policy to be announced tomorrow may indicate a rising trend in the interest rate.

Last credit policy prescription did not raise the interest rate, but only increased the repo rate. "This time, both repo rate and interest rate hikes by 25 basis points are being foreseen, the combined effect of which is considered a negative for the overall market," Mr Kejriwal said.

Mr Rajesh Agarwal of CD Equisearch said that interest rate hike was being seen as a dampener for the manufacturing sector. "But the rate hike per se is good for the banks as it creates possibility of greater margins in the medium term," he added.

Majority of the bank stocks, including private banks, today closed in the negative as their valuation touched a "reasonable" level after factoring in the results and possibility of public offer to increase capital to meet the Basel norms, according to analysts. Andhra Bank, IOB and Vijaya Bank scored minor gains, while Allahabad Bank and BoI finished flat.

BPCL and HPCL were direct beneficiaries of the softening crude price and finished in the green. Bajaj Auto, Maruti, Tata Motors and Ashok Leyland moved up in anticipation of higher dispatches in a stable oil price regime.