Technically, BNF need to sustain over 15800-16000 zone for further rally up to 16500-17150; otherwise, more sellers may creep in and it may fall 15200-14600 zone in the near term.
Trading Idea: BNF-MAR
CMP: 15685
Either sell below 15750 or on rise around 15800-15850-16000;
TGT1: 15600-15480-15212*-15011-14919-14830
TGT2: 14700-14619*-14499-14370-14130-14000
TGT3: 13812-13541-13405*-13345
TSL> 16100 (+/- 50 Points)
Note: Consecutive closing (3 days) above 16100 for any reason, BNF may further rally up to 16210*-16350-16475*-16615-16965-17150* in the near term (alternative bullish case scenario).
Going by the deposit rate cuts in various saving instruments by the Govt on last Friday, it seems that RBI is gearing for 0.25% rate cut on or before policy date and banks has to transmit the total 1.50% of rate cut to the borrowers/economy in a phased manner. On an average, Banks has transmitted around 60% of the previous rate cut of 1.25%.
As there are significant balance sheet stress and NPA issues, it may be very difficult for the banks to pass on the entire rate cut benefit to the borrowers, especially for the PSBS.
Present NPA recovery issues may also deter fresh normal lending and business activities in future as there will be an element of fear on both sides (banks & borrowers), if a loan repayment is failed for any unforeseen circumstances.
As par some reports, Govt may merge twenty eight PSBS in to 4-6 major PSBS with SBI/BOB/PNB as some of the "lead banks". But, considering the strong political unions in the banking sector, such M&A activity may not be so smooth and may take considerable time. Already, bank unions are blaming higher management and political connections for the present NPA situation.
Also, Govt's proposal to bring down the savings rate at one go will not be taken good by the savers and there may be black lash against it like the previous PF issues.
Govt need to start this lowering of deposit rates at least two years ago in an incremental manner.
India need to have a lower real rate of borrowing costs (max 4-5% bank loan interest) for the survival of the industry/MSME as the traditional higher rate of interest for decades may be one of the reason for the present state of stressed assets in the banking sector and corporates/MSME are also in significant stress (dilemma of twin balance sheet issues).
Globally, after the G-20 inspired rally (BOJ/ECB/PBOC/FED), there will be "Buy Back" blackout period from today till next six weeks, which may keep the SPF in pressure.
Analytical Charts:
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