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Banking stocks are seen rangebound with a positive bias in the coming week, as traders will build fresh positions noting that most public sector banks are in an oversold zone. Stocks of some PSU banks like Bank of Baroda and Punjab National Bank have fallen drastically over the past few days and these stocks could see an upside in the coming week. Also, market participants will eye the interim budget for 2014-15, due Monday, for any announcements regarding the government's borrowing number and capital infusion in state-owned banks. If the government pegs a lower fiscal deficit number, then its borrowing from the market through issuing government bonds would be less and that could be a positive for banking stocks. In January, The finance ministry has asked state- owned banks to give details of their credit growth during the festival season by Jan 31 to check their eligibility for additional capital infusion.
The government, which has already infused 140 bln rupees in public sector banks, has promised further capital infusion after ascertaining their retail lending performance between October and January. The country's largest state-owned bank, State Bank of India, yesterday reported a 34.2% on-year fall in Oct-Dec net profit as against analysts' estimates of a 25% fall to 25.40 bln rupees. Stocks of SBI closed down 1.7% at 1,475.10 rupees. After tepid QIP (qualified institutional placement) response and hike in interest rate, the stock has been under pressure.
An improvement in economic data could also result in some positive movements by banking stocks. The Consumer Price Index-based inflation for January fell to a two-year low of 9.78%, while the Wholesale Price Index based inflation stands at an eight month low of 5.05% for the same month. A fall in inflation would provide some room to the Reserve Bank of India for monetary easing going forward. Monetary easing increases the profitability of banks and also investment interest in them.
Banking stocks are seen rangebound with a positive bias in the coming week, as traders will build fresh positions noting that most public sector banks are in an oversold zone. Stocks of some PSU banks like Bank of Baroda and Punjab National Bank have fallen drastically over the past few days and these stocks could see an upside in the coming week. Also, market participants will eye the interim budget for 2014-15, due Monday, for any announcements regarding the government's borrowing number and capital infusion in state-owned banks. If the government pegs a lower fiscal deficit number, then its borrowing from the market through issuing government bonds would be less and that could be a positive for banking stocks. In January, The finance ministry has asked state- owned banks to give details of their credit growth during the festival season by Jan 31 to check their eligibility for additional capital infusion.
The government, which has already infused 140 bln rupees in public sector banks, has promised further capital infusion after ascertaining their retail lending performance between October and January. The country's largest state-owned bank, State Bank of India, yesterday reported a 34.2% on-year fall in Oct-Dec net profit as against analysts' estimates of a 25% fall to 25.40 bln rupees. Stocks of SBI closed down 1.7% at 1,475.10 rupees. After tepid QIP (qualified institutional placement) response and hike in interest rate, the stock has been under pressure.
An improvement in economic data could also result in some positive movements by banking stocks. The Consumer Price Index-based inflation for January fell to a two-year low of 9.78%, while the Wholesale Price Index based inflation stands at an eight month low of 5.05% for the same month. A fall in inflation would provide some room to the Reserve Bank of India for monetary easing going forward. Monetary easing increases the profitability of banks and also investment interest in them.
