Cloud over banks, NBFC stocks as moratorium ends and NPA concerns weigh

Impact of rising bad loans may become discernible only in the second half of FY21. This may hurt asset quality and earnings growth, particularly of small and medium-sized banks

A cloud of uncertainty hangs over the outlook on banking and non-banking financial stocks (NBFC) amid the indecision over extending the moratorium period. On Tuesday, the Bank Nifty index climbed nearly 2 per cent but failed to sustain the gains to end just 0.24 per cent higher. In an earlier session, the index had tanked 3.14 per cent. 

Banking and NBFC stocks have been laggards this year which makes them attractive bets. However, most investors have wary making large bets given the uncertainty over loan restructuring following the end of six months of moratorium period.

In recent months, excess liquidity has made