After RBI Comments, Bulls don’t Find PSBs Bankable
Nifty, Sensex tumble as PSU bank stocks crash on NPA & rate fears
MAJOR LOSERS AMONG BANK STOCKS
CMP (`) % Change PNB 149.40 -5.97 Syndicate Bank 69.65 -4.39 Bank of India 154.75 -4.29 IDBI Bank 56.70 -4.22 Union Bank 143.75 -4.19 OBC 138.10 -4.06
MAJOR SECTORAL LOSERS BSE Sectoral Indices % Change Metal -1.68 Bankex -1.66 Finance -1.33 Healthcare -1.03 Industrials -0.89 Basic Materials -0.75 Mumbai: Public sector bank shares dragged down the Nifty and the Sensex by more than half-aper cent on Thursday as prospects of more rate cuts receded after the Reserve Bank of India held on to its ‘neutral’ stance in Wednesday’s bi-monthly monetary policy.
The Nifty stayed above the 10,000 mark, which it had crossed last week, but lost 67 points — or 0.67% — to end at 10013, marking its biggest fall in two weeks. The Bank Nifty index fell 1.52% as State Bank of India and ICICI Bank fell more than 2% each to .₹ 300.5 and .₹ 295.7, respectively. The Sensex lost 0.74%, or 238 points, to end the day at 32,237.
Reliance Industries gained 2% to .₹ 1,664.70 — a new lifetime high.
Stocks have been led by a gain in Bank Nifty in the past six months, with the pace of the rally strengthening in past two months. Driving this gain in bank stocks were hopes of a quick end to the bad loans issue — after RBI ordered lenders in June to invoke bankruptcy proceedings in cases where normal resolution seemed impossible — and prospects of quick rate cuts.
But RBI’s cautious tone in Wednesday’s policy disappointed many investors. It cut rates by 25 basis points, but declined to change its stance to ‘accommodative’, while warning that inflation could rise in the coming months.
Some investors found this puzzling, especially because the central bank’s macro-economic commentary was not optimistic. RBI said lack of a pick-up in private capex was a worry while PMI data for July showed a dip due to GST implementation. Manufacturing PMI fell to an eight-year low, while services PMI dipped to a four-year low.
“The policy stance was a little dovish in our view though the rate action was in line with expectations. We continue to avoid public banks though we do feel government and regulatory action to resolve banks’ NPA woes are on the right track,” said Vaibhav Sanghavi, co-CEO, Avendus Capital.
Analysts said the selloff in bank shares reflected the unwinding post the build-up ahead of the RBI meet. The Bank Nifty had risen 6% in the month before August 2.
Deepak Jasani, head (retail research) at HDFC Securities, said shares of public sector banks would stay buoyant till the results season, after which there could be some selloff. “The street is waiting for the results of some of the larger state-run banks such as Bank of Baroda and State Bank of India. The trend in PSU banks will become clearer after that.”
Analysts said one rate cut of 25-50 bps will not help banks much. “What will be important to track is the speed/extent of recovery from old defaulters under the IBC (Insolvency and Bankruptcy Code) and rate of creation of new defaulters going ahead,” Jasani said.
Rate-sensitive sectors such as real estate and automobiles also fell on Thursday due to the uncertainty in monetary policy. The Nifty Auto fell 0.68% while Nifty Realty fell 0.85%.
Stocks of oil marketing companies cheered the government’s decision to raise kerosene and LPG prices at regular intervals as it would improve the timing of cash flows of these firms.