Bank Stocks Outlook for the week – 29.12.2014 to 02.01.2015

Bank Stocks Outlook for the week – 29.12.2014 to 02.01.2015

Bank stocks may beat the likely bearish wider market trend and consolidate next week as overall sentiment for the sector remains positive. Bank Nifty is likely to consolidate in the near term, but private sector bank stocks facing some profit booking pressure may drag Bank Nifty down.

Banking is showing a lot of strength, there has been no major sell off in the sector, and it is still the clear leader. And interest rate cuts are due soon, and that should improve their treasury income portfolio, and net interest margins should benefit as most banks seem to have already cut their rates.

Meanwhile, foreign institutional investor activity is expected to be muted due to the year-end holiday season abroad.

Market participants will also remain cautious ahead of the first bankers' retreat scheduled for Jan 2-3. Heads of all public sector banks and financial institutions, along with Prime Minister Narendra Modi, Finance Minister Arun Jaitley, and Reserve Bank of India Governor Raghuram Rajan, among others, will be in attendance.

We expect that reforms related to public sector banks will be a key agenda at the meeting, which will lend cues to the market going ahead.