Bank Stocks Outlook for the week – 09 to 13.03.2015
( www.rupeedesk.in )
Boosted
by a pro-investment Budget, and followed by a rate cut, bank stocks are
expected to
continue
trading with a positive bias next week even as traders may remain slightly
cautious
ahead
of key macroeconomic data releases.
On
Wednesday, the Reserve Bank of India cut its repo rate by 25 basis points for
the second time in 45 days. The repo rate now stands at 7.50%. Low repo rate is
expected to transmit into lower lending rates, which in turn is expected to
revive the investment cycle and increase credit offtake from banks.
The
medium-long term outlook for banks is positive. But, with a lot of data due
next week,
especially
CPI (Consumer Price Index inflation), traders will be cautious before taking
long
positions.
The Central Statistics Office will release the January Index of Industrial
Production and CPI inflation data for February on Mar 12. A recovery can be
seen in the Bank Nifty in the early part of the next week, while some
consolidation may occur in the later half, and apart from weaker public sector
banks, stocks of most private sector banks and large PSU banks are expected to
do well going ahead.
The
Budget, presented on Saturday, allocated 79.4 bln rupees for capitalisation of
PSU banks for 2015-16, indicating that like 2014-15, only select PSU banks will
receive government funding based on the new efficiency parameters. On Monday,
ratings agency Moody's Investors Service downgraded local and foreign currency
deposit ratings of Central Bank of India and Indian Overseas Bank to Ba1 from
Baa3.
The
rating action reflects Moody's assumption of a lower level of support from the
Government of India following the government's recent announcements that
indicate that it wishes to differentiate between state-owned banks when
distributing capital. Both Indian Overseas Bank and Central Bank of India,
among others, did not qualify to receive government fund infusion in 2014-15.
