Bank Stocks Outlook for the week – 04 to 08.04.2016
Trade
seen positive next week ahead of RBI policy
( www.rupeedesk.in )
Banking
stocks are seen trading positive next week ahead of the Reserve Bank of India's
monetary
policy
statement on Tuesday, at which the central bank is widely expected to reduce
the policy rate by 25 basis points to 6.50%. With the impending RBI policy on
Apr 5, expectations of a rate action are running strong and yield on benchmark
10-year G-Sec also has dipped sharply below 7.5% levels.
This
is likely to keep sentiments positive for the Bank Nifty. On Thursday, the
benchmark 10-year
7.59%,
2026 gilt ended at 100.88 rupees, or 7.4590% yield. The price ratio of Bank
Nifty/Nifty has
come
up to 2.10 from 2.04, indicating outperformance of Bank Nifty over the Nifty in
the recent
period.
For
the week, the Nifty Bank rose 1.81%, settling at 16174.90. Yesterday, the
National Stocks
Exchange's
Nifty-50 ended at 7713.05, down 0.04% on week, while the S&P BSE Sensex
closed at
25269.64,
down 0.27%.
The
fact that Consumer Price Index-based inflation was at a lower-than-expected
5.18% in February,
against
5.69% in January, has fuelled hopes of a rate cut, with some market
participants even speaking of a 50-bps rate cut by the RBI on Tuesday. The
government's decision to stick to its fiscal
consolidation
road map and cut the fiscal deficit to 3.5% of GDP in 2016-17 (Apr-Mar) is also
seen as a major reason for the central bank to ease rates. While we accede that
stress is likely to be high, ICICI Bank has been able to strengthen its retail
business and manage its profitability. Similarly, insurance stake sale and
repatriation of capital from overseas branches could help cover credit for
cost.