Banking stocks gained momentum on better than expected 

The quarter ended December, demonetisation which increased the liquidity and reports of some reforms from the government which could reduce the proportion of bad loans in the banking sector which is a prerequisite to kick-starting the investment cycle “The earnings growth trajectory for India Inc. is improving and that was visible in December quarter results,” Harsha Upadhyaya, CIO-Equity, Kotak Mutual Fund told The fund house expects seeing a similar earnings trend in March as well. He prefers private sector financial companies in the banking space as issues regarding bad loans are not as big as PSU banks. The focus is on those with a stronghold on the retail side. Though there is a policy push to resolve non-performing assets (NPAs), nothing has materialised yet, he told the channel, adding that one must wait till there is further clarity on the issue. However, experts feel that we need some solid reforms and not a band-aid kind of approach. The momentum will fail if banks shift their bad loans from one category to another instead of cleaning up the “We need a resolution of the asset which confirms is it a bad debt or not a bad debt. Once you know it’s a bad debt you have to write it off.

 The bottom line is that we need action rather than changing it from one account to another,” Santosh Singh, CFA, is the Head of Research at Haitong Securities India Private Limited said in an interview “These things doesn’t change anything for the sector. The problem is PSU banks are not well capitalised to take that an action. We have seen policy framework being formed many time Singh further added that we have been hearing it for many years and the outcome has been that govt. comes out with one more scheme where the debt gets restructured. “For the momentum to sustain, what we actually need is an actual plan, he added Public sector banks’ NPAs surged by over Rs 1 lakh crore during the April-December period of 2016-17 while Gross NPAs in the first nine months of the current fiscal rose to Rs 6.06 lakh crore by December 31, 2016, from Rs 5.02 lakh crore during the entire year of 2015-16. The gross NPAs were Rs 2.67 lakh crore at the end of 2014-15. The amount of total stressed assets, which comprises NPAs and restructured loans, is much higher

Read more for Indian Stock Tips-http://bit.ly/ace_services