Indian shares shake off early jitters on bank freeze

Monday, 26 July 2004, 07:00 Hrs
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NEW DELHI: India's benchmark share market index staged a smart recovery in the mid-day trade Monday after opening on a negative note following the official freeze on the private sector Global Trust Bank (GTB).

Dealers said that the market index managed to rise from its early lows in the intra-day trade on buying in shares of heavyweight old economy sectors like steel and cement.

The market sentiment was also lifted by the government's announcements that it would soon come out with a restructuring proposal for the failed Global Trust Bank and ensure the safety of deposits with the failed bank.

At the noon trade, the benchmark 30-share Bombay Stock Exchange sensitive index or Sensex was quoting at 5,105.62, representing a gain of 32.28 points or 0.64 percent over its previous session's close.

"The market did witness some panic selling at the opening of the trade today on new of the moratorium on Global Trust Bank," said Neeraj Deewan, an equity market analyst with brokerage firm Quantum Securities.

"But the market index soon managed to wipe off all of its losses after both the government and the Reserve Bank of India (RBI) came out with reassuring statements on the Global Trust Bank moratorium issue," Deewan told IANS.

"While shares of some banking companies continues to be weak, the overall market mood has stabilised now with institutional investors turning their attention towards heavyweight counters."

Andhra Pradesh-headquartered Global Trust Bank was put under moratorium for a period of three months, till October 23, by the RBI Saturday.

The central finally took the step after successive attempts over the past two years to revive the bank -- whose capital and reserves had been wiped out by bad debts -- had failed to produce concrete results.

Soon after, several depositors -- in panic at possible loss of their savings and retirement benefits -- began flocking various branches of the 10-year-old private bank that has been financially troubled for the past two years.

Finance Minister P. Chidambaram said Monday deposits with Global Trust Bank were "reasonably safe." He said more steps would be taken on Global Trust Bank before the three-month moratorium ends.

Global Trust Bank informed the Bombay Stock Exchange Monday that the RBI had proposed to amalgamate the bank with public sector Oriental Bank of Commerce.

RBI has advised the Global Trust Bank to submit its "suggestions and objections," if any, to the draft scheme of amalgamation not later than August 7.

In the old economy sector, shares of Tata Steel, India's largest private sector steel maker, was up 2.8 percent at 374.10 and tobacco giant ITC was quoting 4.3 percent higher at 1,042.55.

Shares of ICICI Bank Ltd., one of India's fastest growing private sector banks, were on the other hand trading at 257.95, a loss of 1.2 percent from its previous session's close.

Source: IANS
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