GOLDEN RULES FOR TRADING

Bank Stocks Outlook for the week – 21 to 25.03.2016 To trade with upward bias on RBI rate cut hopes

Bank Stocks Outlook for the week – 21 to 25.03.2016
To trade with upward bias on RBI rate cut hopes

Banks stocks are likely to maintain their upward move in the truncated next week as the underlying
sentiment remains positive over a possible repo rate cut by the Reserve Bank of India. Indian financial markets are closed on Thursday for Holi and on Mar 25 for Good Friday. The central bank is scheduled to detail its monetary policy statement on Apr 5 but market participants expect an out-ofcycle move to reduce interest rate.

A Cogencis Poll of 10 economists showed all expect a 25-basis-point reduction in the repo rate to
6.50%. The government has committed to the fiscal consolidation roadmap, CPI (consumer price
index-based) inflation was better-than-expected and Fed (US Federal Reserve) interest rate is not
anytime soon. All these conditions support the case for a rate cut.

government's decision to cut interest on small saving schemes, announced post market hours
yesterday, is also seen supporting bank stocks as lenders have been asking for such reduction to ensure depositors are not migrating from fixed deposit schemes. Further news flow pertaining to the
commentary from investigating authorities on loan defaults involving a large corporate as well bank
officials will also provide cues on specific banks. Specific commentaries from banks pertaining to loan rates post migration to marginal cost-linked loan pricing from Apr 1 will be also be watched for its impact on net interest margin.