www.rupeedesk.in
Stocks of banks are seen moving up next week on expectations of positive steps from the Reserve Bank of India Governor Raghuram Rajan at the mid-quarter policy review on Sep 20. However, cautioned that the rise would be short lived and they are still cautious in the medium-term ahead of US Federal Reserve's crucial meet on Sep 17-18. The RBI policy is the positive trigger that investors will look for and hence we expect some upward movement for bank stocks, but we are still cautious because of certain other factors like rising NPAs (non-performing assets) and Fed tapering. Even though equity markets have improved on the whole, and many sectors such as information technology and metal have been appreciating, bank stocks have not risen much and may go up next week. Equity market investors are also eyeing the advance tax numbers of all banks and that would be a major trigger for traders to take positions in bank stocks. Stocks of Punjab National Bank, Union Bank of India, Canara Bank, ICICI Bank, and Axis Bank have seen a rally of more than 15% before settlement and these stocks are expected to gain maximum in the coming week. According to source-based information, State Bank of India paid 11 bln rupees as advance tax for Jul-Sep, while IDBI Bank and Union Bank of India paid 4 bln rupees and 3 bln rupees, respectively. Bank of Baroda paid 6.2 bln rupees for Jul-Sep and Central Bank of India paid 1.5 bln rupees for the same period, sources said. Among private banks, Kotak Mahindra Bank paid 1.7 bln rupees and IndusInd Bank paid 2.1 bln rupees as advance tax for Jul-Sep, sources added. Advance tax numbers of more banks are likely over the weekend as Sep 15 is the deadline to pay these taxes. The Bank Nifty seen in the 9950-10500 range next week. While some bouts of profit booking are likely, the overall trend is positive. Banks are also likely to benefit from increase in credit demand as companies are substituting their working capital requirements by taking loans instead of issuing commercial papers or corporate bonds. Adjusted for all the stress, we see ICICI Bank, Axis Bank better placed than PSU banks as their hit on book value is 50 55% of its net worth against 20-25% for ICICI Bank and Axis Bank. On the macroeconomic front, the Wholesale Price Index-based inflation for August, to be released Monday, is likely to provide clues on the monetary policy. With the rupee's gradual rise on the back of a string of RBI measures, we expect bank stocks to rally by as much as 8-10%, with private sector banks leading the charge. Public sector banks are expected to catch up too. Small and mid-cap banks will be preferred among bank stocks.
Stocks of banks are seen moving up next week on expectations of positive steps from the Reserve Bank of India Governor Raghuram Rajan at the mid-quarter policy review on Sep 20. However, cautioned that the rise would be short lived and they are still cautious in the medium-term ahead of US Federal Reserve's crucial meet on Sep 17-18. The RBI policy is the positive trigger that investors will look for and hence we expect some upward movement for bank stocks, but we are still cautious because of certain other factors like rising NPAs (non-performing assets) and Fed tapering. Even though equity markets have improved on the whole, and many sectors such as information technology and metal have been appreciating, bank stocks have not risen much and may go up next week. Equity market investors are also eyeing the advance tax numbers of all banks and that would be a major trigger for traders to take positions in bank stocks. Stocks of Punjab National Bank, Union Bank of India, Canara Bank, ICICI Bank, and Axis Bank have seen a rally of more than 15% before settlement and these stocks are expected to gain maximum in the coming week. According to source-based information, State Bank of India paid 11 bln rupees as advance tax for Jul-Sep, while IDBI Bank and Union Bank of India paid 4 bln rupees and 3 bln rupees, respectively. Bank of Baroda paid 6.2 bln rupees for Jul-Sep and Central Bank of India paid 1.5 bln rupees for the same period, sources said. Among private banks, Kotak Mahindra Bank paid 1.7 bln rupees and IndusInd Bank paid 2.1 bln rupees as advance tax for Jul-Sep, sources added. Advance tax numbers of more banks are likely over the weekend as Sep 15 is the deadline to pay these taxes. The Bank Nifty seen in the 9950-10500 range next week. While some bouts of profit booking are likely, the overall trend is positive. Banks are also likely to benefit from increase in credit demand as companies are substituting their working capital requirements by taking loans instead of issuing commercial papers or corporate bonds. Adjusted for all the stress, we see ICICI Bank, Axis Bank better placed than PSU banks as their hit on book value is 50 55% of its net worth against 20-25% for ICICI Bank and Axis Bank. On the macroeconomic front, the Wholesale Price Index-based inflation for August, to be released Monday, is likely to provide clues on the monetary policy. With the rupee's gradual rise on the back of a string of RBI measures, we expect bank stocks to rally by as much as 8-10%, with private sector banks leading the charge. Public sector banks are expected to catch up too. Small and mid-cap banks will be preferred among bank stocks.
