S&P: Cuts Banks Of India's outlook to Negative From Stable.
Our take: Now BOI should fall faster. It proves that coming quarter likely to be worse and recovery in fortunes of PSU bank can take long time. Won't be surprised that some other PSU banks are also downgraded in coming week. Our sell call on JDL @ 830 fell to 450 in less than 3 weeks. No one believed us (at time of our sell call) that JDL fall will be so steep. Looking at Q4 to be worse than Q3, we believe that BOI may slide to even 50 level by May expiry. We also advise not to buy PSU banks for the time bring. So far, only dust has come off/out from the kitchen platform. Cockroaches are yet to come out . Look at Kingfisher. NPAs 7000 crores but amount which banks can realise from sale of assets/securities/collaterals may not exceed 100 crores. We can say with FULL confidence that banks are stuck with similar situation (where securities are not more than 10-15% of loan amounts) in all BIG accounts. And BIG borrowers account for nearly 70-80% of total NPAs. We will not be surprised if huge fresh NPAs arise from Q1/FY17 onwards.
Moreover, outlook of market is negative. Due to rise in crude/commodity prices, global markets going up. But it is very BAD for Indian economy. Govt now will never roll back excise duty on petrol/diesel. Higher crude prices will jack up our import bills which means higher CAD and Rupee will weaken significantly as our exports are down. And govt will hike petrol/ diesel prices which will lead to HIGH inflation. And we expect budget to be negative for Eq markets because govt has to raise resources to fund 1.30 lac crore bill of 7th pay commission/OROP ( impose more taxes).
Finally yesterday SBI chairperson also stated that Q4 NPAs will be higher
Our take: Now BOI should fall faster. It proves that coming quarter likely to be worse and recovery in fortunes of PSU bank can take long time. Won't be surprised that some other PSU banks are also downgraded in coming week. Our sell call on JDL @ 830 fell to 450 in less than 3 weeks. No one believed us (at time of our sell call) that JDL fall will be so steep. Looking at Q4 to be worse than Q3, we believe that BOI may slide to even 50 level by May expiry. We also advise not to buy PSU banks for the time bring. So far, only dust has come off/out from the kitchen platform. Cockroaches are yet to come out . Look at Kingfisher. NPAs 7000 crores but amount which banks can realise from sale of assets/securities/collaterals may not exceed 100 crores. We can say with FULL confidence that banks are stuck with similar situation (where securities are not more than 10-15% of loan amounts) in all BIG accounts. And BIG borrowers account for nearly 70-80% of total NPAs. We will not be surprised if huge fresh NPAs arise from Q1/FY17 onwards.
Moreover, outlook of market is negative. Due to rise in crude/commodity prices, global markets going up. But it is very BAD for Indian economy. Govt now will never roll back excise duty on petrol/diesel. Higher crude prices will jack up our import bills which means higher CAD and Rupee will weaken significantly as our exports are down. And govt will hike petrol/ diesel prices which will lead to HIGH inflation. And we expect budget to be negative for Eq markets because govt has to raise resources to fund 1.30 lac crore bill of 7th pay commission/OROP ( impose more taxes).
Finally yesterday SBI chairperson also stated that Q4 NPAs will be higher
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