Reliance Capital positive on banking space
Sunil Singhania, Head Equities, Reliance Capital is positive on banking space.
January 06, 2011 / 13:24 IST
Sunil Singhania, Head Equities, Reliance Capital is positive on banking space.
Singhania told CNBC-TV18, "We have always seen in the past that bank stocks tend to be inversely correlated with inflation trends. There is no doubt that inflation is at more than 10% and not showing signs of coming off meaningfully in the near-term which is definitely a big headwind. The headwinds for the banks have also been a little bit amplified by the fact that short-term liquidity has been very tight, government spending has been very slow which has caused deposits of the government with the RBI in excess of Rs 1,50,000 crore."He further added, "Causing this sort of short-term liquidity has meant that the refinance for the CDs which the bank had borrowed last year at 6-6.5% have been maturing in the recent past. Banks have been forced to renew it at upwards of 9-9.5%. So there is this near-term headwind for banks. It has also become complicated by some newsflow which we saw in November which has led most of us to believe that probably bank advances might slow down a little bit.""They would have to be much more diligent. They were in the recent past and that has caused expectations for the credit growth to be pulled down, in a lot of cases by at least 2-3% points. But we have to remember that what we are seeing in the banking stocks in particular is also a reflection of the huge outperformance, which the banking sector in particular showed during the first ten months of the year.""I think this pull down not withstanding in over a one-year period; the banking sector is still one of the best performing sectors. From our perspective, we remain very positive on the banking sector. We feel that most of the banks
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