The Hindu Business Line : Market participants upbeat on banking stocks

THE recent fall in the prices of bank stocks notwithstanding, analysts and traders are betting on a significant appreciation on banking scrips in the near term.

Although the BSE Bankex ( BSE's index of banking stocks) has fallen by around 7 per cent, since the beginning of this year, almost in tandem with the BSE Sensex, stock traders continue to be bullish on bank stocks.

"From here on we foresee a 10-per cent appreciation in bank stocks in the next 15 days, but they will move along with the market. For the BSE Sensex 6050 is a crucial level. If this level is breached, then there will be a downward movement of 10 per cent on stock prices," said Mr Vijay Saraf, Chief Operating Officer, Centrum Finance.

Since banking is a sensitive sector, driven by political news, movement on stock prices will depend on a lot of factors, he said.

The market has been upbeat on bank stocks which have outperformed many other sectors in the recent past even in days of volatile trading, driven by news of possible consolidations in the banking industry, good credit growth and good net-interest margins.

However, analysts are of the view, that since this sector has been `overbought' it is seeing some kind of technical correction from January 4.

The Bankex declined to the current levels of 3483.92 points from 3754.26 on January 3

"Big operators had told their clients to keep away from banking over the past couple of days. The whole market has been upbeat on bank stocks. The reason for the decline in prices is unclear and may be due to some profit booking," said an analyst.

However, analysts maintain that nothing fundamental has changed in terms of their view with regard to the sector. In fact, some leading private banks, which have declared their third quarter results, have done better than expected and this is seen as a positive for the market.

According to a trader with a foreign equities broking firm, the market had built up a lot of expectations with regards to a possible increase in foreign direct investment into private banks and the lifting of the 10 per cent ceiling on voting rights of foreign shareholders in Indian private banks.

When the Finance Minister postponed the announcement of the `Roadmap to banking reforms' to next week, it made some market players jittery, he said.

Going forward a lot of the movement in the banking stocks in the near term will be determined by result-driven activities, he said.

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