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Bank stocks are likely to trade with a positive bias in line with the broad market next week, but low investor participation due to year-end holiday is likely to keep volumes thin. Activity is seen stock specific with mid-sized banks being preferred. This is mainly because of buying by mutual fund houses to propel their net asset values as the year draws to a close. Most funds will buy mid-cap PSUs (public sector banks) to perk-up their NAV (net asset value). Preference would be to buy cheaper stocks as compared to index heavy weights. Allahabad Bank, Canara Bank, ING Vysya Bank, Union Bank of India, Karnataka Bank, Bank of India and South Indian Bank among others may see buying.
Axis Bank stocks are seen trading with a positive bias on Monday as the Reserve Bank of India, after market hours yesterday, removed curbs placed on the purchase of the bank's stocks by foreign investors. Expectation that the December inflation number reading may be lower month-on-month may also bode well for bank stocks. If this turns true, then it may prompt the Reserve Bank of India to maintain status quo on interest rates. In the previous policy review, the RBI maintained status quo but had warned that it will act on off-policy dates. If the expected softening of food inflation does not materialise and translate into a significant reduction in headline inflation in the next round of data releases, or if inflation excluding food and fuel does not fall, the Reserve Bank will act, including on off-policy dates if warranted. The central bank is scheduled to detail its third quarter monetary policy review on Jan 28. We believe 11000-11200 would remain important support for the banking index in the coming week.
Bank stocks are likely to trade with a positive bias in line with the broad market next week, but low investor participation due to year-end holiday is likely to keep volumes thin. Activity is seen stock specific with mid-sized banks being preferred. This is mainly because of buying by mutual fund houses to propel their net asset values as the year draws to a close. Most funds will buy mid-cap PSUs (public sector banks) to perk-up their NAV (net asset value). Preference would be to buy cheaper stocks as compared to index heavy weights. Allahabad Bank, Canara Bank, ING Vysya Bank, Union Bank of India, Karnataka Bank, Bank of India and South Indian Bank among others may see buying.
Axis Bank stocks are seen trading with a positive bias on Monday as the Reserve Bank of India, after market hours yesterday, removed curbs placed on the purchase of the bank's stocks by foreign investors. Expectation that the December inflation number reading may be lower month-on-month may also bode well for bank stocks. If this turns true, then it may prompt the Reserve Bank of India to maintain status quo on interest rates. In the previous policy review, the RBI maintained status quo but had warned that it will act on off-policy dates. If the expected softening of food inflation does not materialise and translate into a significant reduction in headline inflation in the next round of data releases, or if inflation excluding food and fuel does not fall, the Reserve Bank will act, including on off-policy dates if warranted. The central bank is scheduled to detail its third quarter monetary policy review on Jan 28. We believe 11000-11200 would remain important support for the banking index in the coming week.
