Bank Stocks Outlook
for the week – 27.06.2016 to 01.07.2016, Bias positive next week on recovery
post Brexit
Bank stocks are likely to recoup losses and trade with a
positive bias next week, tracking the trends
in the broad market as investors shift their focus on
domestic triggers from 'Brexit.' However,
investors will be cautious ahead of the expected volatility
due to expiry of June derivative series on
Thursday. Investors will have to focus on domestic factors
such as progress of monsoon and will also
await developments related to appointment of the Reserve
Bank of India governor. Current RBI
Governor Raghuram Rajan had announced that he will return to
academia when his term ends in
September. Market has been speculating who will succeed
Rajan, termed as an inflation-hawk by
market participants, to gauge further trends on interest
rates.
Private sector banks such as IndusInd Bank and YES Bank may
see sustained buying driven by higher volume, while ICICI Bank may see some recovery. Trends in
the currency as well as bond market will be closely tracked as they have implications on the non-interest
income of the banks. Yesterday, rupee ended at its lowest closing level since Feb 29 as the
UK referendum yesterday favoured the country leaving the European Union. The rupee closed at
67.9600 per dollar as against 67.2500 on Thursday. Volatility in the rupee's exchange rate could
adversely impact borrowers who have unhedged foreign currency exposure. This in turn may also
impact banks as the central bank
mandates lenders to make provisioning against such clients.