Weak sentiment to overshadow banking stocks

Banking stocks are expected to extend losses next week as the overall sentiment in the broader equity market remains negative, dealers and analysts said.

The global market turmoil, failures of mortgage lending giants Freddie Mac and Fannie Mae, and Lehman Brothers’ huge write downs are likely to keep the sentiment back home jittery.

Second quarter results of major investment banks Goldman Sachs and Morgan Stanley will also be closely watched next week.

“Global factors, more than domestic undercurrents, will drive the market in the week to come. Results by banks will be watched out for,” said an analyst with a research firm.

This week, sentiment were beaten badly following the recent global market turmoil. Indices fell consecutively for four trading sessions after opening on a positive note on Monday.

“Trading will remain lacklustre in the entire market, including the banking sector,” said a senior dealer.

Inflation fell for a third consecutive week to 12.10 per cent for the week ended August 30.

Despite inflation falling, the market is not drawing any comfort as the inflation rate still remains well above the Reserve Bank of India’s target of 7 per cent for 2008-09.

Q2 results, treasury

Investors are also likely to remain on the sidelines ahead of banks’ July-September earnings, dealers said.

While there can be some positive factors like write-back of mark-to-market losses on investment portfolios, concerns about quality of assets and net interest margins will weigh, analysts said.