Can you still bank on banking stocks?

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Can you still bank on banking stocks?

Bruised by the Reserve Bank of India's hawkish credit policy stance on Tuesday, it is likely that the banking sector may face a threat of de-rating on short-term basis.

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Saikat Das, moneycontrol.com

Bruised by the Reserve Bank of India's hawkish credit policy stance on Tuesday, it is likely that the banking sector may face a threat of de-rating on short-term basis.

So can investors continue with their 'long' investment bet on banking stocks? Yes, says Arun Kejriwal founder of Kejriwal Research & Investment Services. In fact he will continue to look for opportunities to buy the dips.

Talking to moneycontrol.com he said, "I will buy banking stocks as and when a correction comes through. Rising interest rates have been hurting bank margins since the past one year. And the pain is not yet over; we may see one final round of rate hikes. But after six months, it will start falling and then one can expect a 15% upside on some bank stocks in next 12 months."

Also read: RBI may hike policy rates by 75 bps this year: Chetan Ahya

Stocks like State Bank of India (SBI), Oriental Bank of Commerce (OBC), Bank of Baroda (BoB), Bank of India (BoI), Corporation Bank , Indian Overseas Bank (IoB), Axis Bank and ICICI Bank are finding place in analysts' recommended kitty of bank stocks over 12-18 months time.

However, they are not a preferred bet for investors with a three-month view. "These stocks may see de-rating in next three months," analysts have said. Morgan Stanley, a global broking house, has already downgraded some state-run banks including SBI, Canara Bank , PNB , BoI, BoB and Corporation bank citing pressure on the lenders' net interest margins.

"RBI policy measures will have some impact on banks, at least in the next three to six months," said Ravindra Nath, vice-president of research at Asit C Mehta Brokerage.

RBI surprised the market by hiking key policy rates by 50 basis points. It has further hiked savings deposit rate by 50 bps to 4%, thus exerting more pressure on banks' net interest margin (NIM). Accordingly, Bank Nifty plunged more than 3% on Tuesday.

At 1.02 pm on Wednesday, Bank Nifty was trading at 10,889.30, down about 0.08% when the broader index 50-share Nifty was down nearly 1% to 5,519.95 points.