Bank Stocks Outlook: Seen down next week as broad mkt likely weak

[K.Karthik Raja]

Bank Stocks Outlook: Seen down next week as broad mkt likely weak

MUMBAI - Bank shares are expected to remain subdued next week
following the weak sentiment in the broad market.
Market will be on the selling side. There are two major events
next week:F&O (futures and options) expiry and Budget. Next week will
be quite eventful.Fall in overseas markets amid concerns of recession
in U.S. has led to worries foreign funds will continue to withdraw
investments from the local market. Though there is no fundamental
problem in banking shares, the CNX Bankex was more hit than Nifty and
Sensex.
Since Monday, Sensex has fallen 4.23% and Nifty had shed 3.88%
while Bank Nifty slipped 7.4%.Domestic mutual funds booked profits
yesterday. Investors may continue to be on the fringes. Only few
trading oppurtunity may take place.

BUDGET EYED
Next week in the Budget if it is announced that the 20% FII
(foreign
institutional investment) limit is relaxed on PSU banks, then it will
be a
big positive for banking stocks.
We expect Finance Minister P. Chidambaram to lift the FII cap.
Also, some developers expect Chidambaram to give more income tax
relaxation on home loan interest payment.
This budget will be for the common man as it is last budget before
the next election.
More income tax relief on home loans will be a positive for banks
and
housing finance companies.

LAST QUARTER PEFORMANCE
Also, investors are wary to buy bank stocks on expectations of a
lacklustre performance in the last quarter given a sharp slowdown in
credit growth, more pressure on net interest margin, and expected
slump in trading profit.
In the third quarter ended December, banks had made huge equity
profit following the surge in Sensex.
However, with FIIs selling off their portfolios following the
spill over of
housing crisis globally, Indian equity markets have been hit badly.
In January, FIIs sold $3.78 bln compared with $2.02 bln buy in
December. So far in February, FIIs have bought $2.03 bln in debt and
equity.
There may be some pressure on margin in March as banks have
reduced their lending rates in February but deposit rates remain high.
However, this pressure will ease in April, as the high cost deposits
raised last year in March will mature this March. We recommend a buy
on stocks that have been badly beaten up in the recent past, like
Punjab National Bank, and ICICI Bank.

Today's closing prices of shares of leading banks in rupees,
compared with a week ago, on National Stock Exchange:
.
Feb 22 Feb 15 % change
.
Andhra Bank 89.15 90.65 -1.65
Bank of Baroda 377.25 412.00 -8.43
Bank of India 347.40 376.45 -7.72
Canara Bank 275.65 304.65 -9.52
Corporation Bank 338.90 338.90 0.00
HDFC Bank 1474.30 1562.25 -5.63
ICICI Bank 1099.80 1190.90 -7.65
Oriental Bank of Commerce 249.85 273.50 -8.65
Kotak Mahindra Bank 815.40 900.80 -9.48
Punjab National Bank 578.85 621.10 -6.80
State Bank of India 2113.80 2295.65 -7.92
Union Bank of India 188.00 199.55 -5.79
.
Sensex 17349.07 18115.25 -4.23
Nifty 5110.75 5317.25 -3.88
CNX Bank Index 8685.1 9380.05 -7.41


K.Karthik Raja
www.kences1.blogspot.com