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Bank stocks are seen slightly weak in the coming week tracking the market but rollover trend in derivatives ahead of December expiry on Thursday will be eyed. While rollovers so far have not been very high in bank stocks, there is still hope that rollovers could happen early next week due to a shortened trading week on account of Christmas holiday on Tuesday and hopes that some investors may look at rolling over positions to the January contract in expectation of a repo rate cut. At its mid-quarter policy review on Tuesday, the Reserve Bank of India maintained status quo on policy rates and liquidity tools like cash reserve Ratio and Statutory Liquidity Ratio. However, the central bank reiterated its guidance that if inflation continued to trend lower then it could open up space for policy easing in Jan-Mar. Concerns over US fiscal cliff continue to remain due to lack of any significant progress on the issue, and if the uncertainty continues then the market sentiment could turn negative. Despite the recent rally in banking stocks, we continue to be positive on them. However, this time around we are more bullish on select PSU banks wherein either they are posting a steady performance or their worst seems limited. Among large caps, we prefer SBI while in the midcap space we prefer Dena Bank and Development Credit Bank.
