Why Cobrapost expose was a non-event for bank stocks

Moneycontrol Bureau

The shrill Cobrapost bite, this time mostly on large state-owned banks and insurance companies, failed to upset the market confidence on banking shares. The latest sting operation by the investigative news website turned out to be a non-event that did not lead to panic-selling by investors on Monday.

"Largely, investors were not panicked to change their investment calls based on it," Manish Innani, director of Mumbai-based brokerage Prayas Securities told moneycontrol.com.

"Market has taken cognizance of it. However, this could not be a key trigger to cause free-fall in banking shares. Rather, the annual RBI policy did not cheer investors who were expecting some dovish statements from the central bank. Some crest-fallen investors sold shares majorly due to the policy factor. Traders are not expected to take any fresh position next two/three days unless something concrete comes out of such sting operation," he said.

It is learnt that the broader index for banking stocks – Bank Nifty hit intra day low at 12,140 in futures market at around 9.50am on Monday while the Cobrapost press conference (detailing the sting operation) was started around 10am. Bank Nifty was flat to close the day's trading at 12,396. It had closed at 12,393 on Friday, down 2.5 percent. SBI shares on Monday rose nearly 1 percent to close the day's trading at Rs 2,226 on NSE.

After hitting at private sector lenders including HDFC Bank, ICICI Bank and Axis Bank, Cobrapost on Monday alleged that 23 major banks and insurance companies were part of the money laundering racket. Those included Life Insurance Corporation (LIC), State Bank of India (SBI), Bank of Baroda (BoB), Punjab National Bank (PNB), Canara Bank, Tata AIG, Dhanlaxmi Bank, Indian Bank, IDBI Bank, Yes Bank, Federal Bank, Reliance Capital and Birla Sunlife.

A straw in the wind...

The news website on last Friday had actually informed about the press conference and put up a banner in its website around 3.05pm. Meanwhile, a text (rumour) was circulating among all market participants prompting investors to take calls on their investments on bank shares, said traders.

The text reads, "Screening of Operation Red Spider 2 at 9.30am on Monday...........New Delhi. This second part of expose is 20 times bigger than Part I and covers the who's who of the Indian Banking and Financial Industry."

According to a market grapevine, some traders might have gone short on banking stocks on Friday. However, it was not clear on how they squared off their positions.

"Market is currently fraught with a series of scam news be it CBI or Rail minister. Under this scenario, the second round of sting opeartion by Cobrapost added to the negative sentiment. It particularly got prominence because of ongoing negativities. However, we are not going to tweak our investment decisions due to this," said Arun Kejriwal, founder of KRISH, a Mumbai-based brokerage firm.

Saikat Das

saikat.das@network18online.com