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Trade in bank stocks is likely to be steady but the underlying bias would be negative, as banking stocks may witness profit buys at higher levels after this week's fall. State-owned banks are likely to face more pressure, as most analysts and bank officials believe that the funds set aside for capital infusion would be inadequate to meet the growth needs of public sector banks under Basel III that will come into effect from Apr 1.
In his 2013-14 (Apr-Mar) Union Budget speech on Thursday, the Finance Minister P. Chidambaram budgeted 140 bln rupees for capital infusion for state-owned banks. He also announced 10-bln-rupee initial capital for the soon to be set up all-women bank.
We believe budgetary allocation of 14,000 crore for PSU bank re-capitalisation is on a lower side, as State Bank of India alone needs 4,000-6,000 crore (40-60 bln rupees). We believes that the capital infusion is positive for state-owned banks such as State Bank of India, Bank of India, Corporation Bank, Union Bank of India, Indian Overseas Bank and UCO Bank.
We think the increase in the corporate tax surcharge for large companies will have a negative impact on the equity market. We think that the budget will be positive for agriculture (due to interest rate subsidies and higher credit availability for the sector), infrastructure (due to allowing more tax free bonds), financials (due to tax breaks on housing loans).
Private sector banks are likely to benefit from the Budget proposal of including them under the interest rate subvention scheme for short-term crop loans in 2013-14. So far, this scheme was only open to state-owned banks and co-operative entities.
The Budget also clarifies that banks can adjust excess provisions made for writing off rural and urban advances from bad and doubtful reserves created on total gross income and average advances made by the rural branches of such banks as against only rural advances earlier.
Trade in bank stocks is likely to be steady but the underlying bias would be negative, as banking stocks may witness profit buys at higher levels after this week's fall. State-owned banks are likely to face more pressure, as most analysts and bank officials believe that the funds set aside for capital infusion would be inadequate to meet the growth needs of public sector banks under Basel III that will come into effect from Apr 1.
In his 2013-14 (Apr-Mar) Union Budget speech on Thursday, the Finance Minister P. Chidambaram budgeted 140 bln rupees for capital infusion for state-owned banks. He also announced 10-bln-rupee initial capital for the soon to be set up all-women bank.
We believe budgetary allocation of 14,000 crore for PSU bank re-capitalisation is on a lower side, as State Bank of India alone needs 4,000-6,000 crore (40-60 bln rupees). We believes that the capital infusion is positive for state-owned banks such as State Bank of India, Bank of India, Corporation Bank, Union Bank of India, Indian Overseas Bank and UCO Bank.
We think the increase in the corporate tax surcharge for large companies will have a negative impact on the equity market. We think that the budget will be positive for agriculture (due to interest rate subsidies and higher credit availability for the sector), infrastructure (due to allowing more tax free bonds), financials (due to tax breaks on housing loans).
Private sector banks are likely to benefit from the Budget proposal of including them under the interest rate subvention scheme for short-term crop loans in 2013-14. So far, this scheme was only open to state-owned banks and co-operative entities.
The Budget also clarifies that banks can adjust excess provisions made for writing off rural and urban advances from bad and doubtful reserves created on total gross income and average advances made by the rural branches of such banks as against only rural advances earlier.
