Bank Stocks Outlook for the week – 05 to 09.12.2016

Bank Stocks Outlook for the week – 05 to 09.12.2016

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Bank Stocks Outlook for the week – 05 to 09.12.2016
( www.rupeedesk.in )

The Bank stocks are seen volatile, in line with the broader market, in the coming week because most market participants are expected to be on the sidelines exercising caution ahead of the interest rate decision. The resolution of Monetary Policy Committee after the fifth bi-monthly monetary policy review for 2016-17 (Apr-Mar) will be released at 1430 IST on Wednesday. Other that the interest rate decision, banks will be eyeing the review by the central bank pertaining to the 100% Cash Reserve Ratio on deposits raised between Sep 16 and Nov 11. This move was aimed at sucking out excess liquidity from the banking system following the demonetisation of high-value currency notes of 500 and 1,000 rupees. The RBI is slated to review this on or before Dec 9. The incremental CRR, which impounded around 3.3 trillion rupees of excess liquidity from the banking system, had weighed on bank stocks on concern that that it may weigh on the net interest margins of banks. Market participants also said the government's decision, after market hours today, to suspend and transfer some officials of public sector banks may keep negative sentiment for bank stocks. Action was taken against these officials for carrying out demonetization related transactions which were irregular and in violation of RBI's instructions. On the global front, expectations on rate hike by the US Federal Reserve n its December policy and Sunday's constitutional referendum in Italy may cause volatility in Monday's trading session. The expectation of rate hike in the US cemented after data released by the US Labor Department showed hat 178,000 jobs were added in November. The Wall Street Journal poll has expected about 180,000 additions.