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Bank stocks are likely to be rangebound, tracking the broader market for cues in the coming five sessions. Domestic equities are likely to take cues from global markets and Index of Industrial Production data for November, due on Jan 11. Initial trends for Oct-Dec earnings of the banking sector will be eyed, with IndusInd Bank announcing its results on Wednesday. IndusInd Bank has been a consistent performer on the earnings front but the focus will be on asset quality which has emerged as a key concern for the whole sector. We expects the banking sector to register slower growth of around 11% on year with state-owned banks profits growing just 6% on year. We expects asset quality issues and higher provisioning for restructured assets to continue to exert downward pressure on profitability.
The foreign investor flows have been driving the banking stocks up and I have a feeling that some selling could occur at current levels. If FIIs still continue to invest it is likely to be in a bank like State Bank of India. State-owned banks that had surged sharply over the last few sessions are likely to ease sharply as investors look to exit and book profits. We continue to prefer private banks, given their stronger capital adequacy and growth prospects as well as cyclically better asset quality profile, with YES Bank, Axis Bank and ICICI Bank being our top picks. In the backdrop of the near-term environment, in our view, the larger PSU banks like Bank of Baroda and SBI are better placed.
We expects Federal Bank to perform well over the long term and suggests a hold with a target price of 580 rupees, but recommends short-term profit booking at current levels. We do not see substantial improvement immediately in H2FY13, therefore we suggest investors to book partial profit at current levels and continue to Hold the remaining from a long term perspective.
Bank stocks are likely to be rangebound, tracking the broader market for cues in the coming five sessions. Domestic equities are likely to take cues from global markets and Index of Industrial Production data for November, due on Jan 11. Initial trends for Oct-Dec earnings of the banking sector will be eyed, with IndusInd Bank announcing its results on Wednesday. IndusInd Bank has been a consistent performer on the earnings front but the focus will be on asset quality which has emerged as a key concern for the whole sector. We expects the banking sector to register slower growth of around 11% on year with state-owned banks profits growing just 6% on year. We expects asset quality issues and higher provisioning for restructured assets to continue to exert downward pressure on profitability.
The foreign investor flows have been driving the banking stocks up and I have a feeling that some selling could occur at current levels. If FIIs still continue to invest it is likely to be in a bank like State Bank of India. State-owned banks that had surged sharply over the last few sessions are likely to ease sharply as investors look to exit and book profits. We continue to prefer private banks, given their stronger capital adequacy and growth prospects as well as cyclically better asset quality profile, with YES Bank, Axis Bank and ICICI Bank being our top picks. In the backdrop of the near-term environment, in our view, the larger PSU banks like Bank of Baroda and SBI are better placed.
We expects Federal Bank to perform well over the long term and suggests a hold with a target price of 580 rupees, but recommends short-term profit booking at current levels. We do not see substantial improvement immediately in H2FY13, therefore we suggest investors to book partial profit at current levels and continue to Hold the remaining from a long term perspective.
