Stocks of banks are likely to move a narrow range with a positive bias next week on hopes the Reserve Bank of India will slash key rates in its monetary policy review on Oct 30. Action will be stock-specific as several large banks are scheduled to detail their Jul-Sep earnings in the week.. Stock indices are expected to be volatile next week as the October derivatives series expires Thursday.
Bank Nifty futures has been hovering in a narrow range of 11300 to 11680 levels since past ten trading sessions. We are expecting bank index to expire in between this narrow range itself. Large state-owned banks such as Indian Bank, Bank of Baroda, Oriental Bank of Commerce, Indian Overseas Bank, and Punjab National Bank will release their quarterly earnings next week.
Bank of Baroda's net profit at 11.86 bln rupees in Jul-Sep, up just 2% from a year ago and 4% sequentially. Growth in the bank's net profit is seen muted because of some stress on its asset quality and interest income. Among private banks, ICICI Bank, YES Bank, and Kotak Mahindra Bank will release their Jul-Sep numbers next week. Federal Bank, Syndicate Bank, Bank of Maharashtra, Punjab & Sind Bank, and United Bank of India are some others whose earnings are due in the coming days.
Wednesday, India's financial markets are closed for Dussehra festival. Most market participants expect the RBI to respond to the government's recent reforms by cutting rates. Some, however, say a rate cut seems unlikely at this point as inflation remains a worry. Due to this uncertainty, stocks of financial companies are likely to remain in a narrow range until the central bank's policy review.
