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Bank stocks are seen trading with weak bias in the coming week as concerns over the Reserve Bank of India's liquidity tightening steps and weak Apr-Jun earnings by most banks continue to weigh. Currently there are no near-term positives for the sector. On all parameters, be it credit growth, margins or assets quality, most banks are not performing. A re-look is possible in case the rupee stabilizes against the dollar, giving room for the RBI to rollback its measure. In absence of any time frame on the possible rollback of liquidity measures, bank stocks will remain vulnerable. Banks are left with high borrowing costs and are likely to take a hit on their treasury income in Jul-Sep because of the stringent measures imposed by the central bank.
Overall slowdown in economic activity leading to subdued credit demand and rising cases of non-performing assets is also seen weighing on stocks from the banking sector. On ICICI Bank, We believe a poor macro could hurt credit off take/asset quality, and therefore trim our FY14 (Apr-Mar)/FY15 earnings estimates. There could be bounce back linked to short covering in stocks of private sector banks. However, those of public sector banks are mainly seen down on concerns over the asset quality. Stocks of Canara Bank and Oriental Bank of Commerce will also be in focus on Monday following announcement of Apr-Jun results by the two banks on Saturday. Canara Bank yesterday ended down 6.3% at 241.60 rupees amidst sell off on speculation the bank may report a sharp rise in bad loans in Apr-Jun.
Bank stocks are seen trading with weak bias in the coming week as concerns over the Reserve Bank of India's liquidity tightening steps and weak Apr-Jun earnings by most banks continue to weigh. Currently there are no near-term positives for the sector. On all parameters, be it credit growth, margins or assets quality, most banks are not performing. A re-look is possible in case the rupee stabilizes against the dollar, giving room for the RBI to rollback its measure. In absence of any time frame on the possible rollback of liquidity measures, bank stocks will remain vulnerable. Banks are left with high borrowing costs and are likely to take a hit on their treasury income in Jul-Sep because of the stringent measures imposed by the central bank.
Overall slowdown in economic activity leading to subdued credit demand and rising cases of non-performing assets is also seen weighing on stocks from the banking sector. On ICICI Bank, We believe a poor macro could hurt credit off take/asset quality, and therefore trim our FY14 (Apr-Mar)/FY15 earnings estimates. There could be bounce back linked to short covering in stocks of private sector banks. However, those of public sector banks are mainly seen down on concerns over the asset quality. Stocks of Canara Bank and Oriental Bank of Commerce will also be in focus on Monday following announcement of Apr-Jun results by the two banks on Saturday. Canara Bank yesterday ended down 6.3% at 241.60 rupees amidst sell off on speculation the bank may report a sharp rise in bad loans in Apr-Jun.
