Federal Bank plunged from a 52-week high of Rs 133.50 immediately after results that showed a 25.5% rise in net profit.

Profit booking emerged on the counter even as the bank turned out satisfying results. By 12:55 IST, the bank was trading lower by 5.47% at Rs 120.20. It had slipped to a still lower Rs 118.50 earlier. But volumes were impressive on the counter at 4.56 lakh shares.

In contrast, the scrip has been moving at an impressive pace over the past 10 sessions (between 30 April and 15 May 2003), when it rose 34% to Rs 127.15 from Rs 95.

Federal Bank announced Q4 and FY 2002-03 results in afternoon trades today. For Q4, Federal Bank earned a 25.5% rise in net profit to Rs 22.55 crore (Rs 17.96 crore) on a 7% increase in total income to Rs 340.21 crore (Rs 317.90 crore). For FY 2002-03, the company recorded a 28.04% increase in net profit to Rs 105.01 crore (Rs 82.01 crore) on a 6.6% climb in total income to Rs 1,345.89 crore (Rs 1,262.81 crore).

One probable reason for the scrip's contrarian run today could be that media reports have suggested that a foreign brokerage may book profit in mid-cap banking stocks after their huge rally over the past few sessions.

This, perhaps, has seen other mid-sized banking stocks waning today - Oriental Bank of Commerce (down 7.79% to Rs 120.10), Andhra Bank (down 5.90% to Rs 33.50), J&K Bank (down 4.80% to Rs 181.60), Bank of India (down 4.41% to Rs 45.50), Karur Vysya Bank (down 4.36% to Rs 202) and Syndicate Bank (down 3.16% to Rs 24.50).

Federal Bank has been garnering interest on the bourses of late on expectations that it could be subject of merger and acquisition activity. The market sees it as a veritable takeover target. Operators have been keenly pursuing second-rung private banks of late after Bank of Muscat acquired a 26% stake in Centurion Bank for Rs 75 crore. The move set off expectations that large multinational banks may expand base in India through acquisition of private sector banks.

Earlier, the government hiked the foreign direct investment limit in private sector banks, from 49% to 74%. This may have prompted solid interest in Indian private sector banks by MNCs eager to expand.

The banking sector, as it is, is in the limelight following the impressive performance registered by most banks and the bright prospects seen for these. Also, the weak tech sector has prompted investors to shift portfolio to banking stocks.

The Securitisation Act has acted as a major trigger for banking stocks in the form of allowing easy recovery of non-performing assets by banks. The cheap valuation of banking stocks has further brought investor interest in the banking sector.

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