Bank Stocks Outlook
for the week – 03 to 07.10.2016
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Seen volatile next
week ahead of RBI policy Tue
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Bank stocks are seen opening volatile next week ahead of the
Reserve Bank of India's fourth bimonthly policy statement for 2016-17 (Apr-Mar), due on Tuesday.
Market participants are split
between expectations of a status quo and a repo rate cut of
25 basis points on Tuesday. The RBI
stance on policy rate will set the tone for banking stocks
for the latter part of the week. We expect
the policy statement to affect the investment decisions of
foreign institutional investors. Tuesday's
policy decision will be the first policy statement by RBI
Governor Urjit Patel and newly formed
monetary policy committee.
On Sep 22, the government had appointed three academics
Chetan Ghate, Pami Dua, and Ravindra
H. Dholakia as government nominees on the Monetary Policy
Committee. The other three members
of the Monetary Policy Committee are Patel, Deputy Governor
R. Gandhi and Executive Director
Michael Patra. The views of the three external members of
the committee on policy issues are not
well known. After Patel's elevation, Gandhi is holding the
charge of the monetary policy department
for the first time.
The first comment from Patel after taking charge as governor
and his own views on broader issues
including asset quality of banks are widely awaited, as they
will have a direct impact on bank stocks.
Broader markets that saw some correction due to risk
aversion from both domestic and foreign
investors following India's 'surgical strike' on Pakistan
late on Wednesday is also expected to calm
down in the coming week.
The geopolitical concerns between the countries had spooked
foreign investors and raised questions
about whether an escalation of such tensions could impact
the Indian economy and markets going
ahead. Among individual banks, stocks of South Indian Bank
are likely to remain in focus as the
lender will detail its earnings for Jul-Sep on Friday. Kotak
Mahindra Bank, which announced acquiring nearly 99.5% stake in BSS Microfinance post market hours
yesterday, will also be in focus as a similar buyout by another lender IDFC Bank had pushed its
stock sharply higher. There was a
building up of short positions in October series after the
rollover from September series in State Bank
of India and Punjab National Bank as the market
expects a correction in these stocks.