Bank Stocks Outlook for the week – 07 to 11.09.2015
( www.rupeedesk.in )
After
falling around 1-10% this week, stocks of banks are expected to trade sideways
to bearish next week, tracking weakness in the broad markets.
Apart
from the index of Industrial production data due Friday, investors will eye the
Sep 14 inflation data, which will give cues on the probability of the Reserve
Bank of India opting for a rate cut at its bi-monthly policy on Sep 29.
After
data which showed that India's gross domestic product growth slowed down to
7.0% in Apr- Jun from 7.5% a quarter ago, the clamour for the rate cut to spur
economic growth resurfaced.
The
overall sentiment on banks has been week due to sluggishness in credit
off-take. Also, HDFC Bank slashing its Base Rate and the RBI's plan to link
Base Rate calculation to marginal cost of funds added to the bearish sentiment.
On
Tuesday, HDFC Bank cut its Base Rate by 35 basis points to 9.35%, which is the
lowest lending rate among top banks by 35-65 bps. HDFC Bank was able to take
such a large cut in Base Rate because only 30-40% of its loan book was linked
to the Base Rate, compared to 65-75% in the case of ICICI Bank, Axis Bank, YES
Bank, and most state-owned banks.
According
to a CRISIL report, banks would have to take a one-time bottomline hit of 200
bln rupees once the Base Rate computation norms are changed. On Monday, the
central bank tagged State Bank of India and ICICI Bank as domestic systemically
important banks.
Positive
on stocks of Axis Bank and HDFC Bank in the private sector space, while it
prefers SBI on a relative basis among public sector banks. Yesterday, the Bank
Nifty ended at 16129.10, down more than 6% from the previous week.
