If you are a regular in the stock trading, you would have watched the banking stocks steadily falling for six months now. I do not look at the Banking Industry stocks in my portfolio these days. Those stocks purchased through IPOs have just been sitting idle under this category and I would definitely not want to add any banking stocks even on a very low market day, when I normally go out to purchase stocks for investment.
But, why is this situation?
Ever since the farm debt waiver was announced in the last budget, there have been debates on the profitability of PSBs. But the Finance Minister P. Chidambaram was seen reiterating that ‘the farm loan waiver will stregnthen banking‘
Again on the recent inflationary trend, the loans have become costlier and the banks have lost out on the retail and small lending where the recovery has been fairly on time. The low-cost deposits with the banks are sliding down, as number of people with surplus money on hand coming down fast. A small businessman has to close down his low cost deposits on the first attempt and then go fo loans as the interes rates on loand have gone up badly.
The Business Line analyses why and how the banking stocks have hit the low. Read it here.
With all the issues from the vegetables in the market and the stocks in the international market zeroing in on inflation, it is now time that inflation is brought under control. The government need not plan much for the elections if this trend is arrested as the voters will give the government 100% rating and bring them back for sure.
