Bank Stocks Outlook: Weak next wk on RBI policy, politics jitters

[B. Karthick]

Bank Stocks Outlook: Weak next wk on RBI policy, politics jitters
Saturday, Jul 19

Bank shares are likely to weaken next week as investors are
expected to pull out from the sector on concerns of further monetary
tightening on Jul 29.
Already private sector banks have run up quite a bit. There is not
much steam left in these stocks.
Most market participants expect RBI to tighten the policy further
by
hiking either repo rate or cash reserve ratio or both.
Investors want to stay away from banks as they do not want to take
risk before the policy.
We expect investors to exit frontline bank stocks such as ICICI
Bank, and State Bank of India at every dip.
CNX Bank Nifty rose 7% yesterday taking heart from the sustained
downtrend in global crude oil prices.
ICICI Bank was up 12% to 617 rupees, the top Nifty gainer, while
other financial shares like Housing Development Finance Corp soared
9%.
Global crude oil prices are now hovering near $128 a barrel mark,
sharply down from the all time-high of $147.27 a barrel touched last
week.
A cool off in the crude prices eases pressure on inflation.
Inflation for the week to Jul 5 was 11.91%, up from 11.89% a week
ago.

POLICY, POLITICS JITTERS
With inflation continuing to blaze, market players do not see any
respite from monetary tightening soon.
Also, they want to buy more time to see whether the cool off in
oil
prices globally is sustainable or not.
The other uncertainty doing the round is about government's
confidence vote that is due Tuesday.
If the United Progressive Alliance fails in the confidence vote,
there
could be a sharp fall in the Nifty and it may touch a low of 3,300.

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

Jul 18 Jul 11 % change

Andhra Bank 52.35 51.30 2.05
Bank of Baroda 216.20 213.20 1.41
Bank of India 257.35 247.50 3.98
Canara Bank 164.10 167.00 -1.74
Corporation Bank 269.55 274.60 -1.84
HDFC Bank 1034.50 1067.80 -3.12
ICICI Bank 617.45 591.60 4.37
Oriental Bank of Commerce 135.65 134.95 0.52
Kotak Mahindra Bank 470.30 506.50 -7.15
Punjab National Bank 441.10 395.75 11.46
State Bank of India 1299.65 1220.85 6.45
Union Bank of India 115.85 112.75 2.75

Sensex 13635.4 13469.85 1.23
Nifty 4092.25 4049.00 1.07
CNX Bank Index 5389.15 5240.70 2.83

End

B.Karthick,
Research Analyst.