Bank Stocks Outlook for the week – 04 to 08.07.2016
(Positive next week; PSU banks remain 'buy on dip')
( www.rupeedesk.in )
The Bank sector is likely to continue with their upward momentum
tracking gains in the broader market on the back of satisfactory progress of the monsoon
current. The shares of state-owned banks, which were avoided by the market due to bad loan worries till last
week, may see renewed investors Interest. Bank Nifty rollovers (to Jul series) are above its
averages both in terms of open interest and percentage. Most of the positions that have been rolled over are
on the long side PSU Banks still remains a 'Buy on dip' for us, as most of the longs formed are
still intact.
The while satisfactory monsoon rains may give Reserve Bank of
India room to cut interest rate as upside risks to inflation are seen easing. While monsoon rains
were below normal in June, they have picked pace in the past few days and are expected to be higher
than long period average in the season ending September, according to India Meteorological Department
The Bank shares may also expected to benefit from the
implementation of recommendations of the Seventh Pay Commission as it is expected to boost consumption
demand, which could aid the retail loan books of lenders. Development over capital infusion in
state-owned banks will also be eyed for cues. In the Union Budget for 2016-17 (Apr-Mar), the government
had earmarked 250 bln rupees for capital
infusion into public sector banks.
