Weekly
Review: Bank stocks boost benchmarks; broader markets rally 4%
Nifty was up 1.6 percent while
Sensex gained 1.2 percent in the week ended 22 August, 2014. Both the indices
gained in 4 out of 5 sessions this week. Heavy buying in banking stocks
supported this week's rally. CNX PSU index returned robust 6.7 percent gains to
investors this week while Bank Nifty was up 4.8 percent.
Reforms
ahoy
The proposed banking reforms and a
dip in global crude oil prices boosted investor sentiment along with inspiring
speech by Prime Minister Narendra Modi on Independence Day.
The Finance Ministry approved a
draft cabinet note, which proposes to create a holding company structure for public
sector banks. This holding company will raise money in order to recapitalise
public sector banks. UBI, PNB and SBI surged 4-8.1 percent during the week. PNB
and SBI were among the top Nifty gainers this week.
CLSA expects loan growth of Indian
banks to fall to less than 10 percent in August-September this year due to high
base effect and subdued demand in the near term. They however expect it to
recover thereafter. Weakness in Banks is a buying opportunity. ICICI Bank, Axis
and IndusInd are their top picks among private lenders and SBI amongst PSU
Banks.
Cheaper
energy?
A dip in price of crude oil-which
largely constitute the country's import bill namely- not only boosted the sentiment
but will help the government wipe out diesel subsidy completely. Finance
Secretary Arvind Mayaram earlier said that oil marketing companies will soon
not incur any losses in the sale of diesel and diesel prices will be market
driven. He added that easing crude prices will help wipe out diesel
under-recovery very soon.
Crude oil prices fell below USD
100-a-barell mark as Libya increased it's oil output and worries over supply
from key producer Iraq eased.
"Falling crude along with LNG
and coal prices is a huge positive for India, since energy imports accounted
for 36 per cent of its total imports last fiscal, said a Crisil report.
Oil & gas index swelled 2
percent this week as diesel under recovery dropped to record lows levels of Rs
1.31 per litre after this month's diesel price hike; it could fall further to
below 1rs post sep 1 hike. This is a huge positive for oil marketing companies
such as HPCL, BPCL IOC.
Goldman Sachs has a 12 month target
price of 538 on HPC with a blue sky scenario of Rs 1505 apiece and 12-month
target price of Rs 701 on BPCL with a blue sky scenario of Rs 1236/share. BPCL
surged 9.6 percent to close at Rs 672 levels on NSE. The stock was among top
Nifty gainers this week.
Market
Internals
Pharma index also surged 5.3 percent led by
gains in Cipla, Glenmark and Lupin which hit their record highs this week.
Lupin and Cipla surged 5.7-11.3 percent this week; Cipla fared among the top
Nifty gainers this week.
Glenmark Pharma touched a record
high of Rs 749.05 per share on August 20, as it entered into oncology with
discovery and initiation of an innovative bispecific antibody-GBR 1302
molecule.
What's
next
It's a truncated week ahead as stock
market remains closed on account of Ganesh Chaturthi on Friday. It is likely to
remain volatile though as August series F&O contracts expire on Thursday.
FII investments, global markets, crude oil price movement and monsoon will be
watched for direction. On the macro front investors will track Q1 June GDP data
slated to be released on Friday.
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