Rising bad loans spark downgrade fears; foreign institutions among major short-sellers
Derivatives traders are pushing bearish bets against Indian lenders of late amid fears that rising bad debts could trigger further earnings downgrades by analysts and firming government bond yields may hurt banks' bond portfolios.
By Nihar Gokhale, ET Bureau | Updated:
MUMBAI: Derivatives traders are pushing bearish bets against Indian lenders of late amid fears that rising bad debts could trigger further earnings downgrades by analysts and firming government bond yields may hurt banks' bond portfolios.
They mounted fresh short positions in Bank Nifty futures on Monday as shares of top lenders including State Bank of India and ICICI Bank tumbled to a 52-week low and analysts forecast further weakness in these shares.
"Bank Nifty has seen a significant build-up of short positions in the last four to five days," said Siddarth Bhamre, head-equity derivatives at Angel Broking. Brokers said foreign institutions have been among dominant short-sellers of Bank Nifty in recent days.
The index fell 3.35% to 8,554 on Monday. The fall has far exceeded expectations of technical analysts, who did not expect the index to fall below a crucial support of 8707 - the low on October 5 - before Thursday. "After the September quarter results, NPA concerns have significantly risen and threatening further de-rating of banks," said Rajat Rajgarhia, head institutional research at Motilal Oswal Financial Services.
"Currency depreciation, high government borrowing expenditure, rising bond yields and resultant tight liquidity are a chain of events that are causing stress in the banking sector," he said.
Analysts said the weak outlook for banking shares has prompted traders to aggressively carry forward short positions in Bank Nifty futures to the December series ahead of the expiration of the November contracts on Thursday.
"The rollover for the November series has been around 34% (as on Monday), said Monal Desai, VP, Prabhudas Lilladher. This is higher than the 20-25% rollover that usually happens in Bank Nifty futures four days before the expiry, say analysts. "Bank Nifty could slide to even 8100," added Desai.
They mounted fresh short positions in Bank Nifty futures on Monday as shares of top lenders including State Bank of India and ICICI Bank tumbled to a 52-week low and analysts forecast further weakness in these shares.
"Bank Nifty has seen a significant build-up of short positions in the last four to five days," said Siddarth Bhamre, head-equity derivatives at Angel Broking. Brokers said foreign institutions have been among dominant short-sellers of Bank Nifty in recent days.
The index fell 3.35% to 8,554 on Monday. The fall has far exceeded expectations of technical analysts, who did not expect the index to fall below a crucial support of 8707 - the low on October 5 - before Thursday. "After the September quarter results, NPA concerns have significantly risen and threatening further de-rating of banks," said Rajat Rajgarhia, head institutional research at Motilal Oswal Financial Services.
"Currency depreciation, high government borrowing expenditure, rising bond yields and resultant tight liquidity are a chain of events that are causing stress in the banking sector," he said.
Analysts said the weak outlook for banking shares has prompted traders to aggressively carry forward short positions in Bank Nifty futures to the December series ahead of the expiration of the November contracts on Thursday.
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"The rollover for the November series has been around 34% (as on Monday), said Monal Desai, VP, Prabhudas Lilladher. This is higher than the 20-25% rollover that usually happens in Bank Nifty futures four days before the expiry, say analysts. "Bank Nifty could slide to even 8100," added Desai.
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