Asset Quality Review of Banks by RBI
Asset Quality Review (AQR).
Herein lies the good news for Banks. Understand this factor of AQR as I explain in succeeding paragraphs. Once fully understood, you can take a decision whether you should seize this opportunity to make money or not.
Last year before third quarter results, RBI reviewed asset quality of banks and took out list of companies which are heavily indebted to banks.
RBI directed banks to make provision for this indebted amount in Q3 and Q4 results at 50-50 ratio respectively. This led to sharp decline in profits of banks after provisioning half the indebted amount in third quarter.
Now RBI has trimmed the list of indebted companies to be included in AQR. This means that banks will have to make less provisioning in their Q4 results, thereby increasing their bottom line. In other words, Q4 results of banks will be much above street expectations.
Bank scrips will get a boost with this news and move higher.
Technical View
You just read the fundamental good news. Now take into account the technical analysis of BankNifty.
Herein lies the good news for Banks. Understand this factor of AQR as I explain in succeeding paragraphs. Once fully understood, you can take a decision whether you should seize this opportunity to make money or not.
Last year before third quarter results, RBI reviewed asset quality of banks and took out list of companies which are heavily indebted to banks.
RBI directed banks to make provision for this indebted amount in Q3 and Q4 results at 50-50 ratio respectively. This led to sharp decline in profits of banks after provisioning half the indebted amount in third quarter.
Now RBI has trimmed the list of indebted companies to be included in AQR. This means that banks will have to make less provisioning in their Q4 results, thereby increasing their bottom line. In other words, Q4 results of banks will be much above street expectations.
Bank scrips will get a boost with this news and move higher.
Technical View
You just read the fundamental good news. Now take into account the technical analysis of BankNifty.
- Bank Nifty in charts opened with a gap-up at 16257 on 21Apr 2016(last Thursday) and continued moving up.
- This gap-up opening provided a breakout move to BankNifty from upper band of Bollinger. This move has been maintained on Friday as well. Bank BankNifty closed at 16703.on Friday.
- With the breakout move last Thursday, BankNifty confirmed the swing that was forming. Friday closing was an affirmative signal to the swing in BankNifty.
Take Action to Make Money
With such positive environment related for banks, it is time to take action. Make hay while the sun s.....!
Buy May Futures of following banks:-
- Albk May Fut: Buy 57/58, Target 65
- Bankbaroda May Fut : Buy 159/160, Target 180
- Ktkbank May Fut : Buy 110/111, Target 125
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