Bank shares are likely to fall next week tracking global markets that are expected to remain weak.
Besides, sharp interest rate cuts have triggered concerns of higher non-performing assets (NPAs) among banks.
Further expectations of interest rate cuts by the Reserve Bank of India (RBI) have added to these concerns of high NPAs, analysts said.
With inflation rate coming down to single-digit numbers, government officials said there is possibility for RBI to cut interest rates.
“In my view, they (RBI) might do it (cut rates) now or keep watch .... They may possibly cut (rates) next week if inflation remains in single digit,” Prime Minister’s Economic Advisory Council Chairman Suresh D Tendulkar said today.
The headline inflation rate plummeted to a 23-week-low at 8.98 per cent for the week ended November 1 as energy and manufacturing product prices dragged down the Wholesale Price Index (WPI).
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The statistical impact of a high base added to the fall in inflation rate. The headline rate was 10.72 per cent in the previous week and 3.35 per cent a year ago.
According to a report by Motilal Oswal Securities, gross NPAs have grown around 10 per cent in absolute terms in the June-September quarter over the previous quarter.
Several banks, including Union Bank, Punjab National Bank and Bank of Baroda, have increased their provisioning in the second quarter in anticipation of a rise in bad loans.
State Bank of India Chairman O P Bhatt said recently at a banking seminar that there is concern that NPAs may rise.
IT blues continue
Information technology companies’ shares are likely to be around the current level or fall marginally as key clients of these firms continue to face troubles, analysts and brokers said.
“The situation in the US is really bad and there is no sign of it easing out. GM, a large client for TCS and Satyam, is already close to bankruptcy. Trouble with retail chains like Macy’s and Best Buy is brewing.
So, where is the scope for recovery in IT shares,” an analyst at an international brokerage house said.
News that BT, formerly British Telecom, has cut 10,000 jobs is also weighing on stocks such as Tech Mahindra and Infosys Technologies.