Bank Nifty(May): Need To Sustain Above 17150-17250 Zone For Further Rally

Trading Idea: BNF-May

LTP: 16872

Either Sell below 16975-17075 or on rise around 17150-17250;

TGT:16740-16535*-16415-16300*-16115-15975-15715-15500*-15425-15205* (5-15 days)

TSL> 17325 

(SL=+/- 50 points from TSL)

Note: Consecutive closing (3 days) above 17325 for any reason, BNF may further rally up to 17600*-18075-18435 & 18600*-19050-19300 in the near term (alternative bullish case scenario).

Globally all eyes will be on the BOJ for any possible FX intervention amid their extreme jawboning. But, from tomorrow Japan will be on the week long holiday, its highly unlikely they will do any serious intervention and by June end, BOJ may increase some QQE in a 3-D manner.

Apart from BOJ, in the meantime, China debt bubble, Brexit talk, Greece debt restructuring, speculation about Fed stance in June and Oil price may dictate the global market. SPF (CMP: 2058) will be more weak below 2030.

As par some reports, NPA/NPL of the top five private sector banks cumulatively surged by almost 18% (QOQ) & 62.5% (YOY) to Rs.38227.14 cr (Axis/ICICI/HDFC BK/IIB/Yes) as on Q4FY16 after RBI-AQR exercise. Among these, Axis & ICICI Bank accounted almost 85% of the above NPL as of now.

Though, analysts are somehow divided about the current NPA mess as is it the end of worst crisis or more to come; but for Axis & ICICI, the current disclosed NPL/NPA amount/trends may be resolved by at least 8-6 more quarters.

As par the recent RBI submission to PAC, overall gloomy global & domestic economic situation (slowing growth), some policy paralysis, project approvals delays etc are mainly responsible for the present NPA mess apart from some cases of wilful default, frauds and corruptions. 

But, lack of competitive bank interest rate may also be one of the primary reason as cost of doing business in India with Indian Bank funding is far high than other parts of the global economy and thus there is question of viability. 

In any way, wilful or otherwise, banks need to recover their NPA/NPL as quickly as possible and unless macroeconomic situation improves in reality, there is little hope. 

In his way, the present "standard assets" may also be turned into "stressed assets" in the years ahead.

As par some estimates, final FY16 figure of NPL may come around Rs.8 lac cr and by FY17, it may touch around 11-15 lac cr.

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