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Bank stocks are largely seen trading in a narrow range with a negative bias next week, as cautious investors could prefer stocks of defensive sectors like information technology and pharmaceuticals. The banking stocks which we have been constantly monitoring look vulnerable as Nifty managed to retrace 76.4% of previous down move and touched 6350 whereas Bank Nifty did not even retrace 50% during the same period. Investors would also be cautious ahead of the Index of Industrial Production data for November to be released on Jan 10. However, mid-cap public sector banks are seen trading positively as traders and investors would continue to invest these stocks. Bank of India stocks is positive on the bank's asset quality improving.
Allahabad Bank, Canara Bank, Union Bank of India, Karnataka Bank, and South Indian Bank, among others, may see some buying interest. Stocks of Lakshmi Vilas Bank could see some buying interest as the board of the bank in its meeting held yesterday approved a rights share issue of up to 6.50 bln rupees. Mid-cap PSU banks' stocks have seen a solid performance in the last few days and this is expected to continue in the coming week as well. Stocks of IndusInd Bank could also see an upside. With focused approach and well defined management strategies, we expected IndusInd Bank to maintain strong growth run-rate going ahead. Lower corporate bond exposure along with higher focus on core-fee income generation offers further impetus to profit growth.
However, increasing concerns of non-performing assets could weigh on stocks of some public sector banks. The Reserve Bank of India has also said in its Financial Stability Report that if the macroeconomic conditions deteriorate further, the gross non-performing asset ratio of banks could rise to up to 7% by March 2015. Expectation that the December inflation number may be lower month-on-month may see a rebound in 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 on rates but 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 RBI is scheduled to detail its third quarter monetary policy review on Jan 28. The index yesterday ended at 11181.65, down 1.55 points or 0.01% from Thursday and down 2.43% from the previous week.
Bank stocks are largely seen trading in a narrow range with a negative bias next week, as cautious investors could prefer stocks of defensive sectors like information technology and pharmaceuticals. The banking stocks which we have been constantly monitoring look vulnerable as Nifty managed to retrace 76.4% of previous down move and touched 6350 whereas Bank Nifty did not even retrace 50% during the same period. Investors would also be cautious ahead of the Index of Industrial Production data for November to be released on Jan 10. However, mid-cap public sector banks are seen trading positively as traders and investors would continue to invest these stocks. Bank of India stocks is positive on the bank's asset quality improving.
Allahabad Bank, Canara Bank, Union Bank of India, Karnataka Bank, and South Indian Bank, among others, may see some buying interest. Stocks of Lakshmi Vilas Bank could see some buying interest as the board of the bank in its meeting held yesterday approved a rights share issue of up to 6.50 bln rupees. Mid-cap PSU banks' stocks have seen a solid performance in the last few days and this is expected to continue in the coming week as well. Stocks of IndusInd Bank could also see an upside. With focused approach and well defined management strategies, we expected IndusInd Bank to maintain strong growth run-rate going ahead. Lower corporate bond exposure along with higher focus on core-fee income generation offers further impetus to profit growth.
However, increasing concerns of non-performing assets could weigh on stocks of some public sector banks. The Reserve Bank of India has also said in its Financial Stability Report that if the macroeconomic conditions deteriorate further, the gross non-performing asset ratio of banks could rise to up to 7% by March 2015. Expectation that the December inflation number may be lower month-on-month may see a rebound in 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 on rates but 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 RBI is scheduled to detail its third quarter monetary policy review on Jan 28. The index yesterday ended at 11181.65, down 1.55 points or 0.01% from Thursday and down 2.43% from the previous week.
