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The higher-than-expected April inflation numbers that have spiked hopes of a moderation in interest rates saw the bank stocks take a pounding this morning.
Disappointing April inflation numbers hit rate sensitive sector such as banking and realty on Monday.
Moody's downgrade of three private banks ICICI Bank, HDFC Bank and Axis added to the negative sentiment. However, market watchers said that the downgrade was more a “realignment” with the sovereign rating.
The BSE Bankex was down 1.61 per cent with an advance decline ratio of 0:14. The Bank Nifty shed 1.49 per cent with an advance decline ratio of 1:11.
The BSE Realty (down 1.27 per cent ) and the CNX Realty (down 1.77 per cent) also mirrored the negative sentiment.
WPI-based inflation for April stood at 7.23 per cent against 6.89 per cent in March.
Other factors
Analysts believe the inflation factor aside, the larger issues of growth and asset quality with rising non-performing assets especially for PSU banks are impacting the banking stocks more.
“Though valuations are currently attractive mainly for PSU banks, but till growth recovers and there is policy reform, scepticism would continue for at least the next two quarters. People may stay away from this sector, and even if they decide to buy selective stocks in the sector they may not get them cheap,” said a banking analyst.
The realty sector on the other hand continues to remain bogged down with weak demand, high prices and interest costs, forcing market watchers to maintain a “weak” call on the industry for the next one year.
Unless there is a sharp price correction of 15-20 per cent growth cannot happen. Inventory pile up in the industry and lack of clarity on the proposed Land Acquisition Bill also continues to pose a challenge on prospects, added experts.
Mr Sharan Lillaney of Angel Broking said: “RBI is not expected to cut rates as fast as was being expected earlier. Even if there are a couple of more rate cuts of 25 basis points in the next two months it is not going to impact the housing loan EMIs significantly. Moreover, a significant number of real estate companies are struggling with high debt and may go in for restructuring.”
manisha@thehindu.co.in
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