Bank Stocks Outlook For The Week – 04 To 08.12.2017
While state-owned bank stocks are expected to trade with a negative bias next week, the stocks of private sector banks are expected to consolidate at the current levels. State-owned banks have fallen
below the crucial support level, which is negative for the sector in the near term, and one needs to refrain from aggressive buying in this space. The support is seen at 25119 then 24800 zones. After
the announcement of recapitalisation of PSU banks, the banking index rose to record highs. Ever since, it has been taking support at lower levels despite some profit booking in the broader markets. Stock specific up move in select banking stocks is likely to continue. Yesterday, the Nifty 50 extended losses for the fourth straight session and the volatility index surged as much as 11% due to a sudden sell off. Nifty Future has seen rollover of 63.28% from November to December series and Bank Nifty has seen rollover of 55.62%. Caution ahead of the Reserve Bank of India's Monetary Policy Committee's two-day meeting starting Tuesday, and the US Federal Open Market Committee's meeting later in the month, are also likely to keep sentiment subdued. Although the RBI is largely expected to stand pat on rates, with concerns of rising inflation and fiscal slippage, its commentary will be keenly watched and will lend further cues. Any downward pressure in bank stocks, however, could be limited as India's GDP growth was at a three-quarter high of 6.3% in Jul-Sep, and up from 5.7% a quarter ago on the back of a pick up in the industrial sector. The GDP growth was in line with expectations. This is the first time in six quarters that the GDP growth has moved up on quarter.
With the government asking public sector banks to submit their capital requirements and business plans, and reports that modalities of the recapitalisation bonds have been broadly finalised, large state-owned banks may gain, as these are likely to get a bigger share of any recapitalisation allocation. The government will seek approval from Parliament in the Winter Session, which will be held from Dec 15 to Jan 5, to issue such bonds to PSU banks, and this is likely to lend further cues
to the sector.
Source : Cogencis Information Services Ltd.
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While state-owned bank stocks are expected to trade with a negative bias next week, the stocks of private sector banks are expected to consolidate at the current levels. State-owned banks have fallen
below the crucial support level, which is negative for the sector in the near term, and one needs to refrain from aggressive buying in this space. The support is seen at 25119 then 24800 zones. After
the announcement of recapitalisation of PSU banks, the banking index rose to record highs. Ever since, it has been taking support at lower levels despite some profit booking in the broader markets. Stock specific up move in select banking stocks is likely to continue. Yesterday, the Nifty 50 extended losses for the fourth straight session and the volatility index surged as much as 11% due to a sudden sell off. Nifty Future has seen rollover of 63.28% from November to December series and Bank Nifty has seen rollover of 55.62%. Caution ahead of the Reserve Bank of India's Monetary Policy Committee's two-day meeting starting Tuesday, and the US Federal Open Market Committee's meeting later in the month, are also likely to keep sentiment subdued. Although the RBI is largely expected to stand pat on rates, with concerns of rising inflation and fiscal slippage, its commentary will be keenly watched and will lend further cues. Any downward pressure in bank stocks, however, could be limited as India's GDP growth was at a three-quarter high of 6.3% in Jul-Sep, and up from 5.7% a quarter ago on the back of a pick up in the industrial sector. The GDP growth was in line with expectations. This is the first time in six quarters that the GDP growth has moved up on quarter.
With the government asking public sector banks to submit their capital requirements and business plans, and reports that modalities of the recapitalisation bonds have been broadly finalised, large state-owned banks may gain, as these are likely to get a bigger share of any recapitalisation allocation. The government will seek approval from Parliament in the Winter Session, which will be held from Dec 15 to Jan 5, to issue such bonds to PSU banks, and this is likely to lend further cues
to the sector.
Source : Cogencis Information Services Ltd.
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