Tuesday , March 26 2019

Banking stocks will fall for four sessions in a row over lending woes

Banking stocks are being under pressure on account of recent loan-waiver announcement by various political parties


Banking stocks fell for the fourth consecutive session after the Reserve Bank of India’s credit growth data suggested that the banking system is struggling to lend despite the higher liquidity.

And also, the recent loan-waiver announcement by various political parties kept the stock prices under check.

ICICI Bank Ltd declined for the sixth successive session and fell nearly by 7% during this period. The stock fell to 1.5% to hit a seven-week low. HDFC Bank Ltd fell 1%, Kotak Mahindra Bank  by 0.3%, Yes Bank, Indusind Bank and IDFC Bank  have fell 1.6 each.

Amongst public sector banks State Bank of India fell by 1.3%, Punjab National Bank by 2.4%, Union Bank of India by 1.7%, Allahabad Bank  by 1.6%, Syndicate Bank by 1.3%, Canara Bank by 1.3%.

The bank index has fell down for the fourth consecutive session and fell 2.2% during this period. It has hit a near two-week low. The index was trading at 23703.96 points—a level that has last seen on 10 March has now put down to 0.8% from previous close.

In the recent credit growth data has declined already from 30-year lows to 4.8% year on year as of 17 February 2017. Credit substitute growth has declined to 3.7% year on year as of 15 February 2017 as against over of about 20% pre-demonetisation level.

“These data points imply that there is a general credit slowdown due to demand in weakness and not just banks’ a version to lend,” said by brokerage firm HSBC in a 6 March report.

“We continue to expect banks that are sitting on substantial asset quality stress to consolidate further. However, banks are with a stronger balance sheets should continue to do well continuously, mainly by gaining the market share,” the report added.

Also, analysts expect that the recent rise in the bond yield due to change in RBI’s policy stance likely to suffer the banks profitability. The 10-year bond yield was trading at 6.85% from its 6.2% low, which was hit during the demonetisation period.

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