Bank Stocks Outlook for the week – 26 to 30.05.2014
(www.rupeedesk.in)
Stocks in the financial space, including bank stocks, are seen continuing their rise next
week on the back of the better-than-expected Jan-Mar results of State Bank of India, the
country's largest lender.
The underlying optimism that incoming 'Modi sarkar' will be good for economic revival
is also expected to support the rise. The Bharatiya Janata Party-led National Democratic
Alliance won 336 seats of the total 543 Lok Sabha seats and will form the next
government on Monday.
Meanwhile, SBI yesterday reported a net profit of 30.41 bln rupees for Jan-Mar, up 36%
sequentially, which was way above s' estimate of 27.74 bln rupees, thanks to an
improvement in its asset quality.
The positive sentiment towards equities, particularly bank stocks, that was seen before
the May 16 election results, continued this week, and is expected to continue next week
as well.
So, several bank stocks may well touch their 52-week highs or even lifetime highs next
week again. Today, stock indices soared after SBI results. Shares of City Union Bank and
Federal Bank hit lifetime highs. Last Friday, major private sector banks, including ICICI
Bank, Axis Bank, HDFC Bank, IndusInd Bank, Kotak Mahindra Bank, and YES Bank
had hit lifetime highs.
Yesterday, 22 banks, including public sector banks like Bank of India, State Bank of
India, Punjab National Bank, UCO Bank, Indian Overseas Bank, IDBI Bank, Oriental
Bank of Commerce, Andhra Bank, Allahabad Bank, Canara Bank, Central Bank of India,
State Bank of Travancore and Vijaya Bank, and private sector banks like Lakshmi Vilas
Bank and DCB Bank hit their 52-week highs.
But some traders do not rule out profit-taking in banks' shares. For, public sector banks
have gone up by 19-29% in recent times. The Bank Nifty and CNX PSU Bank index
gained nearly 500 points each this week. Goldman Sachs said share prices of some banks
still have an upside based on factors like lower slippages, lower outstanding stressed
loans and macro economic recovery. "In contrast to PSU banks, most PVT banks are well
capitalised and positioned to capture market share from PSU banks. The key risk to our
thesis would be significant capital infusion by government or capital raising from the
market if valuations become attractive," it said.
Market players are expected to focus on old private sector banks such as Dhanlaxmi
Bank. The latter's shares are expected to react to the company's Jan-Mar earnings that
were detailed today. City Union Bank and Karur Vysya Bank will detail their quarterly
results on Monday and Wednesday.
The Bank Nifty's bias would remain positive, and it could trade in a range of 15000- 15700 next week. Shares of SBI are likely to consolidate around 2,850 rupees.
GAIL (India), Hero MotoCorp, Bharat Heavy Electricals, Bharat Petroleum Corp, Cipla,
Coal India, DLF, Hindalco Industries, Oil & Natural Gas Corp, Power Grid Corp of
India, Sun Pharmaceuticals Industries, Tata Motors, Tata Power Co, Larsen & Toubro,
Mahindra & Mahindra and NMDC will report fourth quarter earnings next week.
