Equity Alert: Morgan Stanley sees 25-30% more fall in bank shares

[K.Karthik Raja]

Equity Alert: Morgan Stanley sees 25-30% more fall in bank shares

Morgan Stanley expects banking shares to fall by
another
25-30% from current levels as earnings in the sector will be hit by
slower volume growth, weaker net interest margins, and deterioration
in credit quality.
"We maintain our cautious view on Indian banks...this is the set
of stocks carrying the most downside risk among Asian financials,"
Morgan Stanley said in a report.
The brokerage recommends selling Axis Bank, State Bank of India,
and Kotak Mahindra Bank, and advices avoiding HDFC Bank and ICICI
Bank.
Margins and growth of institutions such as Housing Development
Finance Corp and IDFC will also be impacted as liquidity reduces,
causing their borrowing costs to increase, Morgan Stanley said.
HDFC and IDFC would be better positioned than banks, as they do
not face significant asset quality issues, however, "we would stay
away from financials generally
CNX Bank Nifty was up nearly 2%.