Financial Update-17

Name

Open

High

Low

Close

HDFC

1,754.00

1,774.00

1,749.30

1,768.75

Bank of Baroda

214.65

217.75

214.65

215.65  

SBI

748.00

752.70

744.20

749.55





TECHINCAL UPDATE:

HDFC is currently on an uptrend after experiencing a prolonged downtrend and moving sideways for the past three months. The stock recently crossed its short-term resistance level at 1,750, indicating a possible bullish sentiment. However, this breakout appears to be more relevant for the short term.

To confirm a stronger and more sustained uptrend, HDFC's price needs to break through its long-term resistance at 1,783.10. Until then, uncertainty remains, especially given the market's sensitivity. Any negative news could quickly reverse the gains and push the stock into the red.

On the other hand, SBI and BOB have shown no significant movements. I will provide further updates if there are any noteworthy changes in their price action.

Stay cautious and keep an eye on the key resistance levels for further confirmation of trends.

                           

EARNING OF INDIAN BANK A REPORT BY MOTILAL OSWAL:

Indian Banks' Earnings Outlook: Challenges Ahead in FY26

The earnings of Indian banks could face a downturn in the upcoming fiscal year, driven by persistent macroeconomic challenges, sluggish GDP growth, and subdued credit and deposit growth. A leading brokerage house Motilala oswal estimates that bank earnings may decline by 8.4% year-on-year in FY26 before recovering to a 14.5% growth rate in the subsequent year, supported by margin improvements following a repricing of funding costs.

Credit Growth Deceleration

The overall credit growth in the banking sector has slowed to 11% year-on-year, significantly lower than the average of 16% recorded over FY23-24. According to the brokerage house, the reversal of the repo rate cycle and the limited scope for banks to reduce term deposit rates will likely keep margins under pressure.

Asset Quality Concerns

High slippage ratios and rising asset quality stress, particularly among mid-sized banks with substantial exposure to unsecured retail and microfinance segments, are expected to lead to higher provisioning expenses. This could further weigh on the sector's profitability.

Performance Outlook

Private banks are projected to witness earnings growth at a CAGR of 14% over FY25-27, though a temporary drop to around 11% is expected in FY26. Meanwhile, public sector banks (PSBs) are anticipated to see modest growth at a CAGR of 8% over the same period, compared to the robust 38% CAGR seen over FY22-25. The brokerage house notes that PSB earnings growth will lag behind loan growth over the next two fiscal years.

Analyst Insights

"Net interest margins are likely to remain under pressure in the first half of FY26 as the reversal in the rate cycle lowers lending yields," said Nitin Aggarwal, Research Analyst at Motilal Oswal, in the report.

Investment Recommendations

Despite the challenging outlook, the brokerage house continues to prefer large-cap banks due to their reasonable valuations and strong balance sheets, which position them to navigate macroeconomic uncertainties effectively.

The preferred banks include:

·         ICICI Bank

·         HDFC Bank

·         State Bank of India

·         Kotak Mahindra Bank

·         Federal Bank

·         AU Small Finance Bank

Investors are advised to stay cautious and monitor macroeconomic developments closely, as these factors will significantly impact bank performance in the upcoming fiscal years.


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