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Wednesday, January 25, 2012

Bank on bank stocks


Indian banking sector which was highly battered due to the monetary tightening moves of RBI under which policy-rates were raised for 13 times in a row, came back to life when falling inflation brought the hopes of interest-rate topping.
Inflation was rising due to rising prices of food and primary articles. Rising interest regime is considered as bad for banking, real estate and capital goods sectors. Banks get their NIM (Net Interest Margin) reduced and find it difficult to pass on the higher costs of funds on consumers. Even if banks pass the higher cost on consumers chances of defaults on loans increase.
Businesses also defer the capex plans owing to higher interest costs and thus bank’s credit growth gets hampered.
With RBI reducing CRR ( Cash Reserve Ratio) by 50 basis points to 5.5% affirmed the expectations of topping of the interest rates and market cheered the move.
Since January first week, banking stocks have given lucrative returns.
Returns of the banking sector

But before jumping on the board one should be aware of the fundamentals of these stocks.
Fundamental snaps of Indian banking stocks
one who is willing to take exposure in banking sector may start accumulating in Andhra Bank, PNB, J&K bank and Yes bank. HDFC bank is little overvalued but  it is a robust and stable stock which did not fall much along with its peers.

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