Bank Stocks Outlook: Up next week as global crude oil prices ease

[B. Karthick]

Bank Stocks Outlook: Up next week as global crude oil prices ease
Saturday, Sep 6

Bank stocks are likely to rise next week riding on the positive
sentiment
because of a fall in global crude oil prices.
Also, expectations of further opening of the insurance sector to
foreign
direct investment could add to the run-up in bank stocks.
The banking and financial sector is gaining momentum due to positive
factors like crude oil (fall in prices) and FDI-related expectation in
the
insurance sector. There is support at every dip.
The Group of Ministers has already cleared FDI in the insurance
sector to
up to 49% from 26% at present, and now the proposal will be placed
before
Union Cabinet for its approval.
Higher FDI in the insurance sector will help banks and financial
institutions that have insurance subsidiaries. Already, Housing
Development
Finance Corp, and ICICI Bank have shown interest in divesting equity
stake in
their insurance subsidiaries.
The clearance of India-U.S. nuclear deal will decide the direction in
broad market.
On Monday, there will be clarity on the deal. If it's negative, then
there will be a large fall. But if the deal is through, then there
will be a
good rally.
October crude oil contract on NYMEX is trading at $106.23 a barrel
today.

NEW RBI GOVERNOR
The market will also closely monitor comments from D. Subbarao, the
new
governor of Reserve Bank of India.
After taking over the mantle, Subbarao has made it clear that
controlling
price rise will be on the top of his agenda.
"The immediate priority will be to manage inflation and anchor
inflation
expectations," Subbarao told reporters after signing the scroll of
secrecy to
officially take charge as governor of the central bank.
His predecessor, Y.V. Reddy, had not cut rates in the five years of
his
term. If the new governor's remarks are any indication, then harder
interest
rates may persist for some more time, despite some recent relief on
the
inflation front.
India's headline inflation for the week ended Aug 23 eased to 12.34%
from
12.40% a week ago because of higher base of comparable period of
previous
year.
According to economists, the whole of September may witness lower
weekly
inflation rate because of the base effect.
However, the inflation rate is still much higher than RBI's 2008-09
(Apr-Mar) inflation target of 7% and medium-term target of 5%.

This week's closing prices of shares of leading banks, in rupees,
compared with a week ago, on National Stock Exchange:

Sep 5 Aug 29 % change

Andhra Bank 59.55 56.20 5.96
Bank of Baroda 294.65 283.50 3.93
Bank of India 284.40 267.60 6.28
Canara Bank 228.15 215.40 5.92
Corporation Bank 292.50 290.35 0.74
HDFC Bank 1,248.50 1,276.70 -2.20
ICICI Bank 686.75 671.90 2.21
Oriental Bank of Commerce 178.00 165.35 7.65
Kotak Mahindra Bank 604.15 605.30 -0.20
Punjab National Bank 503.40 480.70 4.72
State Bank of India 1,519.85 1,403.85 8.26
Union Bank of India 151.35 143.10 5.77

Sensex 14483.83 14564.53 -0.60
Nifty 4352.30 4360.00 -0.20
CNX Bank Index 6288.60 6102.05 3.06

End

B.Karthick
Research Analyst.