Who Will Get The Banking Licenses By The RBI?

The Reserve Bank of India (RBI) is likely to issue a few bank licenses in next couple of days. RBI initially received 27 applications before the deadline of 1st July, 2013. However, 2 applicants Tata and Videocon group pulled out of race for various reasons. Bimal Jalan panel, which scrutinized applications for new bank licenses, submitted its report along with shortlisted. Last time it was Kotak Mahindra Bank and Yes Bank who got the banking licenses from the RBI in 2003-04. So this time who will get lucky?

Who Will Get The Banking Licenses by the RBI

Purely on the basis of price action in last one year or so and recent stock developments, I believe following applicant companies (my order of preference) might get the banking licenses this time.

1. Bajaj group

2. Shriram Capital

3. IDFC

4. Aditya Birla group

5. L&T Finance

A surprise winner could be India Post which can dent the prospects of any of the above! And notable losers could be Anil Ambani’s Reliance Capital, Religare, Muthoot, IFCI.

So what does this mean to stock prices of the winners and losers? Will the winners fly to the exosphere? Will the losers crash? Well, it’s a very difficult thing to predict especially when elections are scheduled from next month i.e. April 2014.

My belief is BUY the rumor and SELL the news. Once the licenses are declared, there could be an initial round of profit booking in the stocks of the winners followed by some kind of consolidation and then may be an up move. For losers, I am not sure how the market will react. But may be Anil Ambani group’s Reliance Capital may react positively and surprise everyone. Due to high volatility, trading in these stocks for next couple of days should be best avoided. If positions are already created then lighten them or hedge accordingly!

I hope this time RBI does not disappoint us and postpone it further. Wait and watch for next couple of days!

By the way I reserve the right to be totally wrong! Don’t blame me :-)

Now it’s your turn…..

Feel free to share your experience and thoughts in the comments area.

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