Bank Stocks Outlook for the week – 25 to 29.01.2016 Bias positive; Oct-Dec results, F&O expiry eyed

Bank Stocks Outlook for the week – 25 to 29.01.2016

Bias positive; Oct-Dec results, F&O expiry eyed

 ( www.rupeedesk.in )

Bank stocks are expected to continue their positive momentum from yesterday's trade

into the next week, with stock-specific movements linked to Oct-Dec earnings

announcements of top private banks. Apart from earnings cues, bank stocks will also

track expected volatility in broad markets ahead of the January futures and options

contracts expiry on Thursday in a truncated trading week. Financial markets in India

will be closed on Tuesday for Republic Day.

The Bank Nifty has shown some resilience in the second half of the week but is still

not out of woods, at least till expiry. HDFC Bank, ICICI Bank, YES Bank and IDFC

Bank are among the large private banks that will announce their Oct-Dec earnings in

the coming week. A key factor that the market will track will be the asset quality of

these larger private lenders as there is growing pressure from the government and the

Reserve Bank of India on banks to improve their asset quality. RBI Governor

Raghuram Rajan has set banks the steep task of cleaning up their balance sheets by

March 2017, which has sparked concerns that banks may have to sacrifice profits for

higher provisions in the coming quarters.

Axis Bank, the largest private lender to declare its earnings so far, had to make higher

provisions on account of the RBI insisting on classification of some loans as nonperforming

assets. "On the asset quality, the bank has fully recognized the necessary

impairment and the resultant provisioning impact of the asset reclassification as per

the RBI's assessment in 3QFY2016 which provides comfort with respect to the asset

quality. However, the management remains cautious on its asset quality outlook in the

near term.

Bank Stocks Outlook for the week – 08 to 12.06.2015 (Seen trading with negative bias next week)

Bank Stocks Outlook for the week – 08 to 12.06.2015

(Seen trading with negative bias next week)

 ( www.rupeedesk.in )

Bank stocks are expected to trade with a negative bias next week, tracking weakness in the broad market. Despite a 25-basis-point cut in repo rate by the Reserve Bank of India at its second bimonthly monetary policy statement of 2015-16 (Apr-Mar) on Tuesday, cautious commentary by Governor Raghuram Rajan coupled with a weak monsoon forecast dented market sentiment.

The India Meteorological Department forecast showed a 12% deficiency in southwest monsoon during 2015, worse than its April prediction of a 7% deficiency.

Subsequently, CRISIL Research revised its 2015-16 India gross domestic product estimate by 50 basis points to 7.4% from 7.9% earlier, citing monsoon woes.

Market will closely watch the unfolding of monsoon development before taking a view. There will also be some caution ahead of the IIP (index of Industrial production) and CPI (consumer price index) inflation numbers.

Release of April IIP and May CPI data by the Central Statistics Office is due Friday. We currently overweight on private sector banks, and were limiting their exposure to public sector peers.

Bank Stocks Outlook for the week – 25 to 29.05.2015

Bank Stocks Outlook for the week – 25 to 29.05.2015

 Seen trading with negative bias next week

( www.rupeedesk.in )

Post sector bellwether State Bank of India's earnings, stocks of banks, particularly state owned ones, are seen weak amid volatility next week. The May derivatives contract expires on Thursday, and trade in equities is likely to be volatile over the week as traders rollover their positions to the June series. Yesterday, SBI stocks jumped 5% intraday to hit a one-month high of 305 rupees as the bank reported a sequential fall in bad loans in Jan-Mar. The bank also beat Street estimates on the bottomline front, posting a net profit of 37.42 bln rupees against analysts' forecast of 36.72 bln rupees.

However, it erased gains to end at 282.45 rupees, 2.69% lower than Thursday's close. Stateowned banks followed SBI into the red. Bank of India, Federal Bank and Bank of Baroda ended down 1-2%. Bank Nifty ended down 0.4% at 18433.30 points. In the immediate term, banks - especially public sector banks - will perform poorly as SBI was a sentimentally strong result. In the long term we see SBI as a good stock as asset quality would improve with better macro environment. Private banking stocks are looking relatively better than their PSU counterparts. Stocks like YES Bank, Federal Bank and Axis Bank may witness upsides in the expiry week.

Bank Stocks Outlook for the week – 11 to 15.05.2015

Bank Stocks Outlook for the week – 11 to 15.05.2015

(www.rupeedesk.in)

Economic data releases next week will determine movement in bank stocks as any

interest rate action by the Reserve Bank of India will hinge on the key numbers. Overall

bias is expected to be negative tracking weakness in the broad market. Central Statistics Office will detail April Consumer Price Index-based inflation data and March Index of Industrial Production data Tuesday. April Wholesale Price Index-based inflation data is slated to be released by the commerce and industry ministry Thursday.

We even though the next RBI bi-monthly policy statement is due only on June 2, one

could not rule out an inter-policy action by the central bank as its decisions are largely

data-driven. Meanwhile, stock-specific activity will continue next week.

Syndicate Bank will detail its Jan-Mar results on Saturday, while Bank of Baroda, Union

Bank of India, Central Bank of India, Vijaya Bank, Indian Bank, Oriental Bank of

Commerce, Dena Bank, among others, are scheduled to detail their earnings next week.

Kotak (Bank) continues to add shareholder value organically and inorganically. Our

neutral stance is more valuation-driven.

Bank Stocks Outlook for the week - 04 to 08.05.2015

Bank Stocks Outlook for the week - 04 to 08.05.2015

 ( www.rupeedesk.in )

Bank stocks are likely to trade with a positive bias despite likely weakness in the broad market next week. Stock-specific activity is expected, with Punjab National Bank, Kotak Mahindra Bank, South Indian Bank, Oriental Bank of Commerce, State Bank of Travancore, State Bank of Bikaner and Jaipur, United Bank of India, Allahabad Bank, Indian Overseas Bank, among others, scheduled to detail their Jan-Mar and 2014-15 (Apr-Mar) earnings next week.

Bank Nifty rose 1.9% in the 4-day week ended today, while Nifty fell 1.5% in the same period. According to Bank Nifty has strong support at 18000, but can slip to 17700 if the initial support is broken. Private sector banks have outperformed public sector peers in the Jan-Mar earnings performance thus far. PSU banking stocks have been unable so far to recover as their results are still awaited. The only result from Andhra Bank has remained positive, which gives hope of some reversal in these stocks in the days to come.

Bank Stocks Outlook for the week – 13 to 17.04.2015

Bank Stocks Outlook for the week – 13 to 17.04.2015

 ( www.rupeedesk.in )

Bank stocks are expected to remain steady and trade in a narrow range next week, tracking the broad market. Investors will keenly await the March Consumer Price Index-based inflation data due Monday, that will give cues to the trend of the broad market, and especially to banking sector stocks, they added.

The Central Statistics Office will detail March CPI-based inflation data on Monday, while the

Commerce and Industry Ministry is likely to release March Wholesale Price Index-based inflation data on Wednesday.

The Reserve Bank of India uses CPI inflation as an anchor for taking monetary policy decisions. DCB Bank and IndusInd Bank are scheduled to detail their Jan-Mar earnings results on Tuesday, and Thursday, respectively.

Market participants will await cues on the banking sector with the first set of Jan-Mar earnings numbers coming in next week. Slower advances growth, higher restructuring and elevated slippages will continue to be a hangover for the sector. It also expects the performance of private sector banks to be better than that of public sector peers for Jan-Mar.

We expect DCB Bank and Yes Bank to report a strong earnings growth, whereas Axis Bank remains our top pick.

Bank Stocks Outlook for the Week – 06 to 10.04.2015

Bank Stocks Outlook for the Week – 06 to 10.04.2015

  ( www.rupeedesk.in )

The Reserve Bank of India's first bi-monthly policy statement scheduled Tuesday would lend cues to bank stocks next week with expectations that stocks may extend gains on Monday amid hope of a rate cut by the central bank.

The equity market is abuzz with talks of a repo rate cut by the RBI. Some quarters of the market are also expecting a reduction in banks' cash reserve ratio. So far in 2015, the RBI has reduced repo rate by a total of 50 basis points to 7.50%.

In a report released earlier this month, State Bank of India's economic research department said the RBI should cut banks' CRR requirement by 50 basis points to 3.50% before the Apr 7 monetary policy statement, as that would help banks reduce their lending rates. CRR cut would ease up a lot of cash for the bank and further improve liquidity condition and ease cost of funds.

Towards the end of the next week, stock-specific action is expected as the market is likely to react to news flows ahead of the Jan-Mar results season. Usually, the sector's quarterly earnings start with IndusInd Bank. The private sector lender will detail its Jan-Mar results on Apr 16.

Bank Stocks Outlook for the week - 23 to 27.03.2015

Bank Stocks Outlook for the week - 23 to 27.03.2015

 ( www.rupeedesk.in )

Bank stocks are expected to be volatile next week ahead of contract expiry on Thursday, while the overall bias will be negative.

We expect next week bank stocks could witness some consolidation as present "valuations were not cheap", even though most concurred that banks were expected to perform well going ahead.

The banking sector is expected to do much better in 2015-16 (Apr-Mar) compared to 2014-15 as the expected improvement in economy coupled with declining interest rates may spur credit pick-up and also stabilise the asset quality situation of banks.

In the post-election rally, all the stocks across the banking space witnessed a sharp appreciation in prices on expectations of an economic revival and in turn an improvement in the performance of the banks. We believe that an improving economy after a prolonged period of slowdown has led to buoyancy in the valuations for banks.

Bank Stocks Outlook for the week – 14 to 18.07.2014

Bank Stocks Outlook for the week – 14 to 18.07.2014
(www.rupeedesk.in)

In line with the market, bank stocks are expected to trade lower next week as investors

are likely to continue booking profits. Retail as well as headline inflation data due

Monday along with Apr-Jun earnings of a few banks will give direction to the market

next week. The June inflation data is seen as the key indicator to the Reserve Bank of

India's interest rate stance. The RBI will detail its bi-monthly monetary policy statement

on Aug 5.

According to a Cogencis poll, India's Consumer Price Index inflation is likely to soften to

a near two-and-a-half year low of 7.8% in June, and the Wholesale Price Index-based

inflation rate is likely to moderate to 5.8%.

Stocks of Kotak Mahindra Bank, Federal Bank, and South Indian Bank will be in focus

as these banks will detail their Apr-Jun results Wednesday.

There will be increased focus on State Bank of India and Punjab National Bank on

Monday following the comments of Department of Financial Services Secretary G.S.

Sandhu yesterday, that the two would be the first among public sector banks in which the

government will sell its stocks, mainly to retail investors.

He also said that the government was already working out a strategy for stake-sale in

each PSU bank. However, such stake sale would be in a staggered manner and the

government will not dilute its stake below 51%. Bank Nifty is expected to trade in the

14200-15000 range next week. Bank Nifty looks weak on technical charts and funds may opt for defensive stocks.

Bank stocks Outlook for the week – 30.06.2014 to 04.07.2014

Bank stocks Outlook for the week – 30.06.2014 to 04.07.2014
(www.rupeedesk.in)

The bias for bank stocks next week remains positive as cyclical sectors are expected to

attract buying in the run-up to the Union Budget for 2014-15 (Apr-Mar) that will be

presented on Jul 10.Rollover of positions in banks from the June derivatives series, which

expired on Thursday, to the July series also indicates a positive outlook. Several stocks,

particularly mid-cap ones, have seen build-up of long positions in the July futures

contract.

Mid-cap names like IDBI Bank, Federal Bank, and Union Bank of India have shown high

rollovers with rise in open interest and rise in prices indicating significant long rollovers.

Traders should trade in them with positive bias but should be following strict stop loss

because in case of some correction in market they may come under pressure.

Next week, banks such as Central Bank of India, ICICI Bank, IDBI Bank, Punjab

National Bank, UCO Bank, and State Bank of India will be in focus, as investors will eye

the outcome of their annual general meetings. Market participants expect mid-cap stocks

to rise more than the large-cap ones such as Axis Bank, State Bank of India, and ICICI

Bank.

Yesterday the benchmark indices ended with marginal gains after moving in a thin range

through the day. National Stock Exchange's 50-share Nifty closed at 7508.80, up 0.2% from Thursday's close and the S&P BSE Sensex settled at 25099.92, up 0.1%.

Bank Stocks Outlook for the week – 23 to 27.06.2014

Bank Stocks Outlook for the week – 23 to 27.06.2014
(www.rupeedesk.in)

Bank stocks are likely to be volatile next week due to expiry of the Nifty June futures

and options contract on Thursday. Bank stocks will largely move in tandem with the

market, which will take cues from developments in Iraq. Comments from the finance

ministry on the upcoming Budget will also be keenly tracked.Going ahead, we see the monsoon progress and the Budget to be the two most important

triggers for the markets. We feel that, a progressive budget as well as other reform

initiatives will likely lead to continued outperformance of Indian indices v/s emerging

market peers. Among stock specific, shares of State Bank of Travancore will be in focus

on Monday. Post market hours yesterday, the bank informed exchanges that its board

Has decided to cut the size of the rights issue of equity share to 4.85 bln rupees from 6.29

bln rupees approved earlier.

Next week, banks such ING Vysya Bank, Bank of Baroda, Allahabad Bank, Bank of

Maharashtra, Axis Bank, IndusInd Bank, and Corporation Bank, among others will be in

focus, as investors will eye the outcome of their annual general meetings.HDFC Bank,

which will hold its AGM on Wednesday, will also be in the spotlight as investors will

keenly await comments on the bank's pending proposal of raising foreign shareholding.

Bank Stocks Outlook for the week – 26 to 30.05.2014

Bank Stocks Outlook for the week – 26 to 30.05.2014

(www.rupeedesk.in)

Stocks in the financial space, including bank stocks, are seen continuing their rise next

week on the back of the better-than-expected Jan-Mar results of State Bank of India, the

country's largest lender.

The underlying optimism that incoming 'Modi sarkar' will be good for economic revival

is also expected to support the rise. The Bharatiya Janata Party-led National Democratic

Alliance won 336 seats of the total 543 Lok Sabha seats and will form the next

government on Monday.

Meanwhile, SBI yesterday reported a net profit of 30.41 bln rupees for Jan-Mar, up 36%

sequentially, which was way above s' estimate of 27.74 bln rupees, thanks to an

improvement in its asset quality.

The positive sentiment towards equities, particularly bank stocks, that was seen before

the May 16 election results, continued this week, and is expected to continue next week

as well.

So, several bank stocks may well touch their 52-week highs or even lifetime highs next

week again. Today, stock indices soared after SBI results. Shares of City Union Bank and

Federal Bank hit lifetime highs. Last Friday, major private sector banks, including ICICI

Bank, Axis Bank, HDFC Bank, IndusInd Bank, Kotak Mahindra Bank, and YES Bank

had hit lifetime highs.

Yesterday, 22 banks, including public sector banks like Bank of India, State Bank of

India, Punjab National Bank, UCO Bank, Indian Overseas Bank, IDBI Bank, Oriental

Bank of Commerce, Andhra Bank, Allahabad Bank, Canara Bank, Central Bank of India,

State Bank of Travancore and Vijaya Bank, and private sector banks like Lakshmi Vilas

Bank and DCB Bank hit their 52-week highs.

But some traders do not rule out profit-taking in banks' shares. For, public sector banks

have gone up by 19-29% in recent times. The Bank Nifty and CNX PSU Bank index

gained nearly 500 points each this week. Goldman Sachs said share prices of some banks

still have an upside based on factors like lower slippages, lower outstanding stressed

loans and macro economic recovery. "In contrast to PSU banks, most PVT banks are well

capitalised and positioned to capture market share from PSU banks. The key risk to our

thesis would be significant capital infusion by government or capital raising from the

market if valuations become attractive," it said.

Market players are expected to focus on old private sector banks such as Dhanlaxmi

Bank. The latter's shares are expected to react to the company's Jan-Mar earnings that

were detailed today. City Union Bank and Karur Vysya Bank will detail their quarterly

results on Monday and Wednesday.

The Bank Nifty's bias would remain positive, and it could trade in a range of 15000- 15700 next week. Shares of SBI are likely to consolidate around 2,850 rupees.

GAIL (India), Hero MotoCorp, Bharat Heavy Electricals, Bharat Petroleum Corp, Cipla,

Coal India, DLF, Hindalco Industries, Oil & Natural Gas Corp, Power Grid Corp of

India, Sun Pharmaceuticals Industries, Tata Motors, Tata Power Co, Larsen & Toubro,

Mahindra & Mahindra and NMDC will report fourth quarter earnings next week.

Bank Stocks Outlook for the week - 19 to 23.May.2014

Bank Stocks Outlook for the week - 19 to 23.May.2014
(www.rupeedesk.in)

Stocks in the financial space, including banking, are seen consolidating next

week as profits are taken off the table. However, the underlying bias for the

sector will remain positive. A section of the Street has also not ruled out gains

being extended either. Driving the stellar rally in equity indices this week, the

Bank Nifty gained around 2000 points, out of which over 10% gain was seen

yesterday itself. The complete numbers were not out till the markets closed

yesterday and many traders booked profits post the first two hours of trading.

So the bank stocks still carry the potential to go further up from their current

levels, especially the public sector banks.

Bank stocks that have seen a huge upward movement in the last two weeks will

see profit taking. However, the underlining sentiment remains positive for the

sector and some banks touching 52-week highs or lifetime highs in the next

week cannot be ruled out. Yesterday, stock indices continued to soar as it

became clearer that the Bharatiya Janata Party-led National Democratic

Alliance will form the next government, with the Sensex and Nifty touching an

all-time high and crossing the 25000 and 7500 mark, respectively, as financial

stocks led the rally and Bank Nifty hit a lifetime high of 15742.05 points.

Bank Nifty yesterday opened 14675.60 points up by around 439 points from

the previous day's close, a gain of around 7.25%. Yesterday, stocks of six major

private sector banks, including ICICI Bank, Axis Bank, HDFC Bank, IndusInd

Bank, Kotak Mahindra Bank, and YES Bank, hit lifetime highs and ended up

2.07-5.47% from the previous day.

Other gainers that hit 52-high week levels included state-owned banks namely

Bank of Baroda, State Bank of India, Punjab National Bank, UCO Bank, Indian

Overseas Bank, Indian Bank, and Oriental Bank of Commerce that ended up

1.41-7.34% up from Thursday's close. Once the election euphoria is over midweek,

would await the Jan-Mar earnings of State Bank of India scheduled for

Friday. The performance of SBI is often seen by the market as representing the

banking sector as a whole.

Apart from SBI, private lender Dhanlaxmi Bank will also detail its results for

Jan-Mar on Friday. Bank Nifty's bias to remain positive, but it will consolidate

in 14800-15300 range for next few days and he would not recommend any

bank stocks to buy now as most have run up significantly.

Bank Stocks Outlook for the week - 05 to May.2014

Bank Stocks Outlook for the week - 05 to May.2014

Bank stocks are seen trading with a positive bias next week, although gains could be

limited, with investors favoring pharmaceutical and information technology sector stocks.

Yesterday, traders exercised caution ahead of the release of monthly US employment

data, released after market hours. Data released by US Department of Labor's Bureau of

Labor Statistics showed that total non-farm payroll employment rose by 288,000 in April,

with the unemployment rate falling to 6.3%, the lowest since September 2008.

National Stock Exchange's Nifty ended flat at 6694.80, down 1.60 points from close

Wednesday, and S&P BSE's Sensex closed at 22403.89, down 13.91 points or 0.1%.

Bank Nifty today settled 13.85 points, or 0.11%, lower than Wednesday's close at

12842.00.

The current leg of profit booking could continue till 12500/12700 (on Bank Nifty). We

believe that post initial profit booking, the Bank Nifty is likely to move towards an

eventual target of 13500 in the first half of the month.

Stock market volatility is seen increasing in the coming days as investors prepare for

results of Lok Sabha elections, scheduled to be out on May 16. However, exit polls will

be released after May 12, the last day of the elections. Among banking stocks, Canara

Bank and Union Bank of India could be in focus due to their scheduled earnings

declaration.

(www.rupeedesk.in)

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Bank Stocks Outlook for the week - 17.02.2014 - 21.02.2014

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 Banking stocks are seen rangebound with a positive bias in the coming week, as traders will build fresh positions noting that most public sector banks are in an oversold zone. Stocks of some PSU banks like Bank of Baroda and Punjab National Bank have fallen drastically over the past few days and these stocks could see an upside in the coming week. Also, market participants will eye the interim budget for 2014-15, due Monday, for any announcements regarding the government's borrowing number and capital infusion in state-owned banks. If the government pegs a lower fiscal deficit number, then its borrowing from the market through issuing government bonds would be less and that could be a positive for banking stocks. In January, The finance ministry has asked state- owned banks to give details of their credit growth during the festival season by Jan 31 to check their eligibility for additional capital infusion. 

The government, which has already infused 140 bln rupees in public sector banks, has promised further capital infusion after ascertaining their retail lending performance between October and January. The country's largest state-owned bank, State Bank of India, yesterday reported a 34.2% on-year fall in Oct-Dec net profit as against analysts' estimates of a 25% fall to 25.40 bln rupees. Stocks of SBI closed down 1.7% at 1,475.10 rupees. After tepid QIP (qualified institutional placement) response and hike in interest rate, the stock has been under pressure. 

An improvement in economic data could also result in some positive movements by banking stocks. The Consumer Price Index-based inflation for January fell to a two-year low of 9.78%, while the Wholesale Price Index based inflation stands at an eight month low of 5.05% for the same month. A fall in inflation would provide some room to the Reserve Bank of India for monetary easing going forward. Monetary easing increases the profitability of banks and also investment interest in them. 

Bank Stocks Outlook for the week - 10.02.2014 - 14.02.2014

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Banking stocks are seen rangebound with a negative bias next week as many traders and investors would await State Bank of India's Oct-Dec earnings before deciding on their positions in banks' stocks. The country's largest state-owned bank, SBI, will detail its earnings for Oct-Dec on Friday. Most traders will await SBI results as it would provide a broader and clearer perspective on the whole sector and its outlook going forward. Apart from SBI, private lenders Dhanlaxmi Bank and Lakshmi Vilas Bank will also detail their results for Oct-Dec next week. If the net profit of SBI is more-than-expected, then SBI's stocks could cross the price of 1,600 rupees per share. SBIN (State Bank of India) has added significant amount of short positions and rollovers have also have been very strong. After tepid QIP (qualified institutional placement) response, hike in interest rate stock has been under pressure. SBI, Kotak Mahindra Bank, and Bank of Baroda are starting the new series with significantly higher open interest indicating prevailing short bias among these stocks. Action in bank stocks would also depend on key economic data that would be detailed next week as it would provide clarity on the Reserve Bank of India's monetary policy stance that impacts banks' performances. The Central Statistics Office will detail India's index for industrial production for December and Consumer Price Index-based inflation for January on Wednesday. While the commerce ministry will detail Wholesale Price Index-based inflation for January on Friday. Comments from finance ministry officials on retail loan-linked capital infusion in state-owned banks would also be keenly watched. In January, Cogencis reported that the finance ministry has asked state- owned banks to give details of their credit growth during the festival season by Jan 31 to check their eligibility for additional capital infusion. The government, which has already infused 140 bln rupees in public sector banks, has promised further capital infusion after ascertaining their retail lending performance between October and January.

Bank Stocks Outlook for the week - 03.02.2014 - 07.02.2014

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Bank stocks are seen trading with a negative bias as the overall outlook for the sector remains bearish. Rollovers of positions to the February series in the backdrop of expiry of January contract Thursday indicates significant build-up of short positions. SBI, Kotak Mahindra Bank, and Bank of Baroda are starting the new series with significantly higher open interest indicating prevailing short bias among these stocks. Action would remain stock specific with some banks reporting their results. Stocks of Vijaya Bank, State Bank of Bikaner and Jaipur, Bank of Baroda, Central Bank of India, Corporation Bank, and Andhra Bank would be in focus as these banks release their Oct-Dec earnings. 

SBIN (State Bank of India) has added significant amount of short positions and rollovers have also have been very strong. After tepid QIP (qualified institutional placement) response, hike in interest rate stock has been under pressure. Comments from finance ministry officials on retail loan-linked capital infusion in state-owned banks would also be keenly watched. Earlier this week, Cogencis reported that the finance ministry has asked state-owned banks to give details of their credit growth during the festive season by Jan 31 to check their eligibility for additional capital infusion. The government, which has already infused 140 bln rupees in public sector banks, has promised further capital infusion after ascertaining their retail lending performance between October and January. 

Bank Stocks Outlook for the week - 13.01.2014 - 17.01.2014

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Bank stocks are largely seen trading in a narrow range as most market traders and investors would await the release of economic data, earnings of private banks, and update on dividend announcement by public sector banks. Major private sector banks including YES Bank, Axis Bank, and HDFC Bank will detail their Oct-Dec earnings on Wednesday, Thursday and Friday, respectively. Federal Bank is schedule to detail its quarterly results on Friday. Earnings growth for private banks, particularly HDFC Bank and Axis Bank, will moderate to 25% YoY and 11% YoY, respectively. Fee income growth is expected to be muted and with a lag in asset growth. Stocks of public sector banks would be in focus, as most banks would take a decision on distribution of dividend next week. Mid-size public sector banks including Dena Bank, Oriental Bank of Commerce, Allahabad Bank, Indian Overseas Bank, IDBI Bank and UCO Bank will take a decision on dividend payment to shareholders next week. Bank of Baroda would be among the large state-owned banks to declare interim dividend on Wednesday. Most banks would declare their dividend in the first two days of the week and post that, traders will take bets on the basis of the dividend announced by these banks. Expectations that the December inflation number may be lower month-on-month may see some positive movement in bank stocks. India's annual inflation rate based on the Consumer Price Index (Combined) is seen falling to 10.0% in December due to lower food prices. The CPI inflation rate had hit a lifetime high of 11.24% in November due to high food inflation. The Central Statistics Office will detail the CPI (Combined) inflation rate for December at 1730 IST on Monday, while the commerce ministry will detail the Wholesale Price Index-based inflation for December on Tuesday. If the inflation comes down, we may see an up tick in bank stocks as the chances of RBI's monetary tightening would reduce. However other factors like earnings and dividend announcement would also decide the future course of action. In the previous policy review, the Reserve Bank of India maintained status quo on rates, but warned that it will act on off-policy dates. If the expected softening of food inflation does not materialise and translate into a significant reduction in headline inflation in the next round of data releases, or if inflation excluding food and fuel does not fall, the Reserve Bank will act, including on off-policy dates if warranted. The RBI is scheduled to detail its third quarter monetary policy review on Jan 28. Increasing concerns over non-performing assets could weigh on PSU banks' net profits going ahead, and impact shares of these banks. The RBI also said in its Financial Stability Report that if macroeconomic conditions deteriorate further, the gross non-performing asset ratio of banks could rise to up to 7% by March 2015. We estimate PAT for PSU banks will be weak (8% to -7%) on a YoY basis, except for Union Bank of India, which has exceptionally weak comparatives. The index yesterday ended at 10805.30, down 165.15 points or 1.51% from Thursday and down 3.37% from the previous week.

Bank Stocks Outlook for the week - 06.01.2014 - 10.01.2014

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Bank stocks are largely seen trading in a narrow range with a negative bias next week, as cautious investors could prefer stocks of defensive sectors like information technology and pharmaceuticals. The banking stocks which we have been constantly monitoring look vulnerable as Nifty managed to retrace 76.4% of previous down move and touched 6350 whereas Bank Nifty did not even retrace 50% during the same period. Investors would also be cautious ahead of the Index of Industrial Production data for November to be released on Jan 10. However, mid-cap public sector banks are seen trading positively as traders and investors would continue to invest these stocks. Bank of India stocks is positive on the bank's asset quality improving. 

Allahabad Bank, Canara Bank, Union Bank of India, Karnataka Bank, and South Indian Bank, among others, may see some buying interest. Stocks of Lakshmi Vilas Bank could see some buying interest as the board of the bank in its meeting held yesterday approved a rights share issue of up to 6.50 bln rupees. Mid-cap PSU banks' stocks have seen a solid performance in the last few days and this is expected to continue in the coming week as well. Stocks of IndusInd Bank could also see an upside. With focused approach and well defined management strategies, we expected IndusInd Bank to maintain strong growth run-rate going ahead. Lower corporate bond exposure along with higher focus on core-fee income generation offers further impetus to profit growth. 

However, increasing concerns of non-performing assets could weigh on stocks of some public sector banks. The Reserve Bank of India has also said in its Financial Stability Report that if the macroeconomic conditions deteriorate further, the gross non-performing asset ratio of banks could rise to up to 7% by March 2015. Expectation that the December inflation number may be lower month-on-month may see a rebound in bank stocks. If this turns true, then it may prompt the Reserve Bank of India to maintain status quo on interest rates. In the previous policy review, the RBI maintained status quo on rates but warned that it will act on off-policy dates. If the expected softening of food inflation does not materialise and translate into a significant reduction in headline inflation in the next round of data releases, or if inflation excluding food and fuel does not fall, the Reserve Bank will act, including on off-policy dates if warranted. The RBI is scheduled to detail its third quarter monetary policy review on Jan 28. The index yesterday ended at 11181.65, down 1.55 points or 0.01% from Thursday and down 2.43% from the previous week. 

Bank Stocks Outlook for the week - 30.12.2013 - 03.01.2014

www.rupeedesk.in

Bank stocks are likely to trade with a positive bias in line with the broad market next week, but low investor participation due to year-end holiday is likely to keep volumes thin. Activity is seen stock specific with mid-sized banks being preferred. This is mainly because of buying by mutual fund houses to propel their net asset values as the year draws to a close. Most funds will buy mid-cap PSUs (public sector banks) to perk-up their NAV (net asset value). Preference would be to buy cheaper stocks as compared to index heavy weights. Allahabad Bank, Canara Bank, ING Vysya Bank, Union Bank of India, Karnataka Bank, Bank of India and South Indian Bank among others may see buying. 

Axis Bank stocks are seen trading with a positive bias on Monday as the Reserve Bank of India, after market hours yesterday, removed curbs placed on the purchase of the bank's stocks by foreign investors. Expectation that the December inflation number reading may be lower month-on-month may also bode well for bank stocks. If this turns true, then it may prompt the Reserve Bank of India to maintain status quo on interest rates. In the previous policy review, the RBI maintained status quo but had warned that it will act on off-policy dates. If the expected softening of food inflation does not materialise and translate into a significant reduction in headline inflation in the next round of data releases, or if inflation excluding food and fuel does not fall, the Reserve Bank will act, including on off-policy dates if warranted. The central bank is scheduled to detail its third quarter monetary policy review on Jan 28. We believe 11000-11200 would remain important support for the banking index in the coming week.