Bank Stocks Outlook for the week – 08 to 12.08.2016
RBI policy eyed; bank specific action seen next week
( www.rupeedesk.in )
( www.rupeedesk.in )
Bank stocks are likely to take cues next week from the
Reserve Bank of India's monetary policy but
action is largely seen stock-specific because of the last
leg of Apr-Jun earnings. The central bank will
detail its third bi-monthly monetary policy statement for
2016-17 (Apr-Mar) on Tuesday. While the
RBI is widely expected to keep the repo rate unchanged at
6.50%, investors will eye outgoing
Governor Raghuram Rajan's commentary on the progress made by
banks on reducing stressed loans.
The RBI has kept March 2017 as the deadline for banks to
clean up their balance sheets. Following
the Reserve Bank of India's asset quality review, 11 public
sector banks reported a cumulative loss of
around 130 bln rupees for Oct-Dec. For Jan-Mar, the number
of these banks rose to 14, with the loss
nearly doubling to around 255 bln rupees. So far, the sector
heavyweights like Axis Bank and ICICI
Bank that have reported a rise in bad loans have guided for
a cautious outlook on the asset quality.
In the last leg of Apr-Jun earnings, State Bank of India,
Bank of Baroda, along with their mid-sized
peers like Dena Bank, Corporation Bank, and UCO Bank, among
others will announce their results
next week.
With PSU banks' participation and continuous outperformance
from the private players, Nifty Bank
seems set to test much higher levels in near-term. For this
week, Nifty Bank ended at 18925.95, up
nearly 3% on week. We believe that Federal Bank, SBI, Axis
Bank, and Kotak Mahindra Bank have
potential to move further northward and can be
considered for fresh buying.