The banks in India are nothing much to write home about.The private banks are putting up a big fight to ensure their NPA's do not rise dramatically, show growth and profitability at the same time.They are but a handful at the moment and most of them have hit their upper limit with regard to fii investment.The dii's have maintained or lowered their exposure to them.The darling of the fii's HDFC bank still rules the roost, and should see 700 plus levels, Axis was the flavor of the season once seems to have lost steam, but can come back strongly, as the economy improves. ICICI a murky bank and one trying to copy SBI in its ways and means....will be an also ran, need a little more correction for getting into an investment grade.The result will not be great, and even if they do meet the estimate then there will be a lot of if's and buts....
The story however is not that rosy with the psu banks, admittedly the npa increase would have come down but the problem still exists.Will it be worse than last quarter? , the answer is an empahtic no. Have they yet reached the level of investment grade ...most still have some way to go...a quarter more required to be precise others have reached that. SBI is a candidate for investment, the level seen now will not be seen again for some time, others in this category would be BOB , BOI, J&K bank, and PNB is an avoid Allahabad bank is a may be but risky, Canara bank after the next quarter will look good.
The real investment into banks will come about once the rbi's decision on new bank licenses is released, then we will be able to see significant amount of money coming into this sector.Till then major investment decisions will not be made.The recent rbi announcement to increase liquidity is being welcomed, and should see an uptick in the bank stocks.....but then there will be no rate cut happening in this months policy.
Once more clarity is given and policy decisions are made regarding M&A activity in banking sector, with special regard to foreign banks, then we will see a spate of activity, the targets will be Federal bank, South Indian Bank, Dhanlaxmi bank, Catholic Syrian bank, and a few others too.