Bank Stocks Outlook for the week (18-22.06.2012)

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Jun 18, 2012, 5:33:33 AM6/18/12
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RUPEE DESK: Bank Stocks Outlook for the week (18-22.06.2012)

 

Stocks of most banks may move with an upward bias early Monday, anticipating the Reserve Bank of India to ease its monetary policy at the mid-quarter policy review, which will be released at 1100 IST. The central bank's decision on interest rates and the underlying tone of the review may lend direction to bank shares for most part of next week.


A 25-basis-point rate cut has already been factored in the stocks. In the absence of a rate action, bank stocks may fall sharply lower. Pratip Chaudhuri, chairman of State Bank of India, the country's largest lender, hopes for a 100-basis-point cut in the CRR by the RBI.


More than a repo rate cut, a CRR reduction would augur well for banks as the move will directly inject funds into the banking system and help banks lower their cost of funds, the benefit of which can be passed on to borrowers.


Among global events, the outcome of the election in Greece on Sunday is a key development which will be watched keenly. The election is a critical factor
in resolution of the ongoing debt crisis in the Eurozone as its outcome will determine whether or not Greece will remain a part of the 17-nation block.


Some of the long positions were squared off yesterday post the inflation data but there are quite a few longs left in Bank Nifty (futures). So, we can expect the index to touch 10,200 points in the event of any positive surprise from Greece elections or RBI policy.


Back home, the outcome of the annual general meetings of Axis Bank and State Bank of India on Friday are also expected to have an impact on the shares of respective banks.

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