Caution the buzzword for bank shares on Monday

The outlook on bank stocks next week is cautious, dealers and analysts said Thursday. Too many uncertainties crowd the banking sector at present, they added.

Global crude oil concerns coupled with possible slowdown in public sector consolidation, are likely to dampen sentiment, even as year-end pressures dominate the broad market.

Resurgence in global crude oil prices, coupled with the 25 basis points hike in interest rates by US Federal Reserve, chipped away the bullish sentiment in the market this week.

Oil prices were hovering above the $55 per barrel mark. Continued high prices may lead to hardening of yields of the government bonds.

Another factor skewing the market for banking stocks is speculation that the government has put public sector banks' consolidation on the backburner.

"Though we are bullish on banking in the medium-to-long term, we have not given any buy call for bank stocks after the Fed Reserve rate hike," said N. Subramaniam, assistant vice-president, and head equity sales, SBI Caps.

He expects volatility in the bank stocks' performance next week as the overall market continues to be affected by year-end considerations. The derivates contracts for the month will also expire next week.

"The good news in the banking sector will coincide with results that will start coming in April," Subramaniam said.

Choppiness notwithstanding, select stocks may still rise on news flow, dealers and analysts said.

Safe bets in the current scenario could include HDFC Bank, State Bank of India, and Corporation Bank, said Siddharth Bhaiya, bank analyst with StratCap Securities.

Bank stocks related to the Dabhol Power Co. such as IDBI Ltd, ICICI Bank and Canara Bank may also see some action on the back of speculation that the impasse is likely to resolved soon.

The CNX Bank Index has shed almost 8 per cent this week compared to the nearly 4 per cent fall in the broad indices.

SBI Cap's Subramaniam does not believe the market will fall any further from current levels, notwithstanding calls by leading brokerages for as low as 6050 Sensex levels. "There would be clearer idea next week," he added.