Bank Stocks Outlook: Up next week, but gains may not sustain
0 views
Skip to first unread message
B. Karthick
Sep 20, 2008, 4:42:24 AM9/20/08
to Kences1
Bank Stocks Outlook: Up next week, but gains may not sustain
Saturday, Sep 20
The rally in bank shares is likely to continue next week because
of attractive valuations.
However, gains may not sustain as traders, concerned over
volatility in the short-term, may book profits at every rise.
Bank shares depend upon how global bank shares fare. With the
funds being infused by the (U.S.) Fed and other central banks, it
looks like there could be some buying in global financial stocks.
The U.S. Federal Reserve infused $180 bln into the financial
markets to ease the liquidity crisis after big investment banks went
bust.
Financial giants like Merrill Lynch, Lehman Brothers, and AIG
incurred huge losses because of U.S. sub-prime mortgage crisis.
Morgan Stanley is likely to be taken over very soon.
Banking is the only sector which has seen a lot of two-way trades
on a daily basis in the last one month.
We are optimistic on public sector banks. The valuation gap
between private and public sector banks has come down. Going ahead,
this differential should come down more.
Bank stocks were battered Wednesday following reports of some
Indian banks' exposure to Lehman Brothers, which has filed for
bankruptcy.
ICICI Bank has debt exposure of $80 mln to Lehman Brothers, while
State Bank of India has around $5 mln.
Bank Nifty fell by 3.6% on Wednesday, compared with Tuesday, while
Nifty fell 1.6%.
ICICI BANK, SBI
Shares of ICICI Bank were worst hit amid news of its exposure to
Lehman Brothers globally.
In fact, several other rumours like ICICI Bank's senior management
officials selling their shares and likely rating downgrade, pulled
down its shares by 10% intra-day on Wednesday.
However, subsequent statements by the bank's top officials soothed
frayed nerves and the stock recouped most of its losses to end at
627.50 rupees yesterday on National Stock Exchange.
There could be some upside to ICICI Bank shares based on
valuations. The shares look extremely cheap.
However, some investors would prefer to invest in state-run banks
rather than in private sector banks.
Private sector banks may have investments in risky assets. It is
safer to invest in PSU banks now. Also, the private sector banks are
trading at 2-3 times their adjusted book value and PSU banks at
1.0-1.3 times.
RBI WORRY
The recent turmoil in global financial markets prompted Reserve
Bank of India to call a meeting with treasurers of major banks
recently. RBI sounded out these banks of the potential risks to
derivatives exposure in the U.S. sub-prime contaminated assets.
However, the central bank and Finance Minister P. Chidambaram have
assured that Indian banks are relatively well insulated from the
recent global turmoil.
The central bank also took measures Tuesday to ease liquidity
following the volatility in call money and foreign exchange markets.
The Indian unit, which fell by 82 paise to touch a two-year low of
46.99 rupees per $1 on Tuesday, rose by 60 paise to 46.32 rupees per
$1 following RBI's measures.
Also, the call rate which touched a high of 16% Tuesday, cooled
off to 9% Wednesday.
RBI's liquidity easing measures were similar to that of central
banks globally.
Central banks like Bank of Canada, Bank of England, European
Central Bank, Bank of Japan and Swiss National Bank infused liquidity.
There was also talk that U.S. Treasury Secretary Henry Paulson had
planned to create a special Federal-backed vehicle that may buy
distressed assets from financial institutions.
Following these moves, key U.S. shares rallied the most in six
years Thursday, while India's Sensex surged over 5% today.
Indian market will continue to track their global counterparts
next week.
This week's closing prices of shares of leading banks, in rupees,
compared with a week ago, on National Stock Exchange:
Sep 19 Sep 12 % change
Andhra Bank 61.20 58.50 4.62
Bank of Baroda 323.80 309.65 4.57
Bank of India 283.45 285.65 -0.77
Canara Bank 226.50 212.65 6.51
Corporation Bank 274.00 280.50 -2.32
HDFC Bank 1,299.55 1,244.70 4.41
ICICI Bank 627.50 652.80 -3.88
Oriental Bank of Commerce 175.95 172.95 1.73
Kotak Mahindra Bank 630.35 578.20 9.02
Punjab National Bank 523.65 510.05 2.67
State Bank of India 1,565.75 1,513.55 3.45
Union Bank of India 151.60 150.70 0.60
Sensex 14042.32 14000.81 0.30
CNX Bank Index 6312.05 6194.15 1.90
Nifty 4245.25 4228.45 0.40
End
B.Karthick
Research Analyst.
Saturday, Sep 20
The rally in bank shares is likely to continue next week because
of attractive valuations.
However, gains may not sustain as traders, concerned over
volatility in the short-term, may book profits at every rise.
Bank shares depend upon how global bank shares fare. With the
funds being infused by the (U.S.) Fed and other central banks, it
looks like there could be some buying in global financial stocks.
The U.S. Federal Reserve infused $180 bln into the financial
markets to ease the liquidity crisis after big investment banks went
bust.
Financial giants like Merrill Lynch, Lehman Brothers, and AIG
incurred huge losses because of U.S. sub-prime mortgage crisis.
Morgan Stanley is likely to be taken over very soon.
Banking is the only sector which has seen a lot of two-way trades
on a daily basis in the last one month.
We are optimistic on public sector banks. The valuation gap
between private and public sector banks has come down. Going ahead,
this differential should come down more.
Bank stocks were battered Wednesday following reports of some
Indian banks' exposure to Lehman Brothers, which has filed for
bankruptcy.
ICICI Bank has debt exposure of $80 mln to Lehman Brothers, while
State Bank of India has around $5 mln.
Bank Nifty fell by 3.6% on Wednesday, compared with Tuesday, while
Nifty fell 1.6%.
ICICI BANK, SBI
Shares of ICICI Bank were worst hit amid news of its exposure to
Lehman Brothers globally.
In fact, several other rumours like ICICI Bank's senior management
officials selling their shares and likely rating downgrade, pulled
down its shares by 10% intra-day on Wednesday.
However, subsequent statements by the bank's top officials soothed
frayed nerves and the stock recouped most of its losses to end at
627.50 rupees yesterday on National Stock Exchange.
There could be some upside to ICICI Bank shares based on
valuations. The shares look extremely cheap.
However, some investors would prefer to invest in state-run banks
rather than in private sector banks.
Private sector banks may have investments in risky assets. It is
safer to invest in PSU banks now. Also, the private sector banks are
trading at 2-3 times their adjusted book value and PSU banks at
1.0-1.3 times.
RBI WORRY
The recent turmoil in global financial markets prompted Reserve
Bank of India to call a meeting with treasurers of major banks
recently. RBI sounded out these banks of the potential risks to
derivatives exposure in the U.S. sub-prime contaminated assets.
However, the central bank and Finance Minister P. Chidambaram have
assured that Indian banks are relatively well insulated from the
recent global turmoil.
The central bank also took measures Tuesday to ease liquidity
following the volatility in call money and foreign exchange markets.
The Indian unit, which fell by 82 paise to touch a two-year low of
46.99 rupees per $1 on Tuesday, rose by 60 paise to 46.32 rupees per
$1 following RBI's measures.
Also, the call rate which touched a high of 16% Tuesday, cooled
off to 9% Wednesday.
RBI's liquidity easing measures were similar to that of central
banks globally.
Central banks like Bank of Canada, Bank of England, European
Central Bank, Bank of Japan and Swiss National Bank infused liquidity.
There was also talk that U.S. Treasury Secretary Henry Paulson had
planned to create a special Federal-backed vehicle that may buy
distressed assets from financial institutions.
Following these moves, key U.S. shares rallied the most in six
years Thursday, while India's Sensex surged over 5% today.
Indian market will continue to track their global counterparts
next week.
This week's closing prices of shares of leading banks, in rupees,
compared with a week ago, on National Stock Exchange:
Sep 19 Sep 12 % change
Andhra Bank 61.20 58.50 4.62
Bank of Baroda 323.80 309.65 4.57
Bank of India 283.45 285.65 -0.77
Canara Bank 226.50 212.65 6.51
Corporation Bank 274.00 280.50 -2.32
HDFC Bank 1,299.55 1,244.70 4.41
ICICI Bank 627.50 652.80 -3.88
Oriental Bank of Commerce 175.95 172.95 1.73
Kotak Mahindra Bank 630.35 578.20 9.02
Punjab National Bank 523.65 510.05 2.67
State Bank of India 1,565.75 1,513.55 3.45
Union Bank of India 151.60 150.70 0.60
Sensex 14042.32 14000.81 0.30
CNX Bank Index 6312.05 6194.15 1.90
Nifty 4245.25 4228.45 0.40
End
B.Karthick
Research Analyst.
Reply all
Reply to author
Forward
0 new messages