Bank Stocks Outlook: Seen down next week in line with broad market
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K.Karthik Raja
May 10, 2008, 2:05:01 AM5/10/08
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Bank Stocks Outlook: Seen down next week in line with broad market
Friday, May 9
Bank stocks are likely to be under pressure next week as the
market sentiment worsened on high inflation, expectations of lower
industrial
growth numbers for March, and surging crude oil prices
The bank stocks will behave in line with the broad market, which is
seen
down in the coming week as the overall sentiment is negative.
India's headline inflation rate rose to 7.61% for the week to Apr 26
from 7.57% a week ago, the highest since Nov 8, 2004 when the rate was
7.68%.
The rise in inflation rate is mainly on account of increase in
prices of
food articles. In the food category, tea prices rose by 11%, while
prices of
condiments and spices went up by 3% and that of fruits by 2.3%.
Inflation concerns still loom large with crude oil futures touching
a new
high of $126 a barrel today on New York Mercantile Exchange fuelled by
heavy investment demand.
Overall sentiment is negative and the market is in bearish mode. In
the last couple of weeks, inflation number remained high which
increases the
risk of further monetary tightening by Reserve Bank of India.
The industrial growth figures for March, scheduled for release next
week, are likely to be weak, which may further dampen the sentiment.
Industrial output is seen dipping in March as it may grow by only
3.8%.
India's industrial growth was 8.6% in February from 5.8% a month ago
but
sharply down from 11.0% a year ago.
Bank stocks will be under the scanner due to weak sentiment. The
negative factors are not going to change overnight. The liquidity is
gone and
housing and automobile loan growth is slowing down, which will have a
negative impact on bank stocks.
Most of the banks that had announced their Jan-Mar earnings have
already seen a marginal de-growth in net interest income. With most of
the
banks projecting slower credit off-take in the current financial year,
growth
in core income is expected to be limited.
In addition, the hike in cash reserve ratio by 25 bps in April has
not led the banks to cut deposit rate or increase lending rates. As a
result, net interest margins, especially of state-run banks, are
likely to be
under pressure.
.
This week's closing prices of shares of leading banks, in rupees,
compared
with a week ago, on National Stock Exchange:
.
May 9 May 2 % change
.
Andhra Bank 81.05 83.00 -2.35
Bank of Baroda 292.95 319.00 -8.17
Bank of India 326.70 360.65 -9.41
Canara Bank 234.15 240.75 -2.74
Corporation Bank 340.95 345.75 -1.39
HDFC Bank 1,452.50 1,540.40 -5.71
ICICI Bank 873.85 937.15 -6.75
Oriental Bank of Commerce 209.50 217.30 -3.59
Kotak Mahindra Bank 738.55 821.60 -10.11
Punjab National Bank 506.20 541.70 -6.55
State Bank of India 1,682.10 1,822.40 -7.70
Union Bank of India 162.65 164.15 -0.91
.
Sensex 16737.07 17600.12 -4.90
Nifty 4982.60 5228.20 -4.70
CNX Bank Index 7299.00 7871.90 -7.28
.
End
Friday, May 9
Bank stocks are likely to be under pressure next week as the
market sentiment worsened on high inflation, expectations of lower
industrial
growth numbers for March, and surging crude oil prices
The bank stocks will behave in line with the broad market, which is
seen
down in the coming week as the overall sentiment is negative.
India's headline inflation rate rose to 7.61% for the week to Apr 26
from 7.57% a week ago, the highest since Nov 8, 2004 when the rate was
7.68%.
The rise in inflation rate is mainly on account of increase in
prices of
food articles. In the food category, tea prices rose by 11%, while
prices of
condiments and spices went up by 3% and that of fruits by 2.3%.
Inflation concerns still loom large with crude oil futures touching
a new
high of $126 a barrel today on New York Mercantile Exchange fuelled by
heavy investment demand.
Overall sentiment is negative and the market is in bearish mode. In
the last couple of weeks, inflation number remained high which
increases the
risk of further monetary tightening by Reserve Bank of India.
The industrial growth figures for March, scheduled for release next
week, are likely to be weak, which may further dampen the sentiment.
Industrial output is seen dipping in March as it may grow by only
3.8%.
India's industrial growth was 8.6% in February from 5.8% a month ago
but
sharply down from 11.0% a year ago.
Bank stocks will be under the scanner due to weak sentiment. The
negative factors are not going to change overnight. The liquidity is
gone and
housing and automobile loan growth is slowing down, which will have a
negative impact on bank stocks.
Most of the banks that had announced their Jan-Mar earnings have
already seen a marginal de-growth in net interest income. With most of
the
banks projecting slower credit off-take in the current financial year,
growth
in core income is expected to be limited.
In addition, the hike in cash reserve ratio by 25 bps in April has
not led the banks to cut deposit rate or increase lending rates. As a
result, net interest margins, especially of state-run banks, are
likely to be
under pressure.
.
This week's closing prices of shares of leading banks, in rupees,
compared
with a week ago, on National Stock Exchange:
.
May 9 May 2 % change
.
Andhra Bank 81.05 83.00 -2.35
Bank of Baroda 292.95 319.00 -8.17
Bank of India 326.70 360.65 -9.41
Canara Bank 234.15 240.75 -2.74
Corporation Bank 340.95 345.75 -1.39
HDFC Bank 1,452.50 1,540.40 -5.71
ICICI Bank 873.85 937.15 -6.75
Oriental Bank of Commerce 209.50 217.30 -3.59
Kotak Mahindra Bank 738.55 821.60 -10.11
Punjab National Bank 506.20 541.70 -6.55
State Bank of India 1,682.10 1,822.40 -7.70
Union Bank of India 162.65 164.15 -0.91
.
Sensex 16737.07 17600.12 -4.90
Nifty 4982.60 5228.20 -4.70
CNX Bank Index 7299.00 7871.90 -7.28
.
End
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