Bank stocks are seen trading with a positive bias next week on better-than-expected gross domestic product growth for Jul-Sep, data for which was released post market hours yesterday. India's GDP for Jul-Sep grew at 4.8% against market expectations of 4.7% and a growth of 4.4% in Apr-Jun. Improvement in the GDP, though marginal, is a positive for the stock market as a whole and its impact would be reflected on bank stocks. We are also of the opinion that bank stocks have been beaten down in the previous weeks and they are bound to rise in the coming weeks. We see a short-term upside for bank stocks as there would be renewed cyclical interest as they have seen selling for past some days.
We also said that a rally in the government bond market would lead to rise in bank stocks as it improves their profitability. Market players will track the movement of the new 10-year benchmark gilt 8.83%, 2023 closely to take positions in stocks of banks. However, we are not bullishness on bank stocks in the long term due to asset quality worries, as many have seen rise in loan restructuring and non-performing assets in Jul-Sep. Apart from the 10-year G-Sec, there is no positive for banks and hence there won't be a long-term positive bias as the overall profitability is affected because of rise in NPAs and restructuring of loans in the second quarter.
Within the sector, we continue to prefer stocks of private sector banks compared to their public sector peers. In Jul-Sep, private banks delivered a strong earnings growth of 23.3%, while state-owned banks registered an earnings de-growth of 47.1% due to elevated asset quality pressures, higher operational expenditure, moderate growth in non-interest income and higher marked-to-market provisions. Bank Nifty is expected to trade in the 10900-11250 band next week. If the index crosses its immediate resistance of 11250, it can test 11500 points.
We also said that a rally in the government bond market would lead to rise in bank stocks as it improves their profitability. Market players will track the movement of the new 10-year benchmark gilt 8.83%, 2023 closely to take positions in stocks of banks. However, we are not bullishness on bank stocks in the long term due to asset quality worries, as many have seen rise in loan restructuring and non-performing assets in Jul-Sep. Apart from the 10-year G-Sec, there is no positive for banks and hence there won't be a long-term positive bias as the overall profitability is affected because of rise in NPAs and restructuring of loans in the second quarter.
Within the sector, we continue to prefer stocks of private sector banks compared to their public sector peers. In Jul-Sep, private banks delivered a strong earnings growth of 23.3%, while state-owned banks registered an earnings de-growth of 47.1% due to elevated asset quality pressures, higher operational expenditure, moderate growth in non-interest income and higher marked-to-market provisions. Bank Nifty is expected to trade in the 10900-11250 band next week. If the index crosses its immediate resistance of 11250, it can test 11500 points.
