>BANKING SECTOR (MF GLOBAL)

EXPECTATION BUILDS UP ON REFORMS IN BANKING SPACE

• The strong electoral mandate given to the UPA, would build up high expectation in terms of reforms in the banking space.
• The sentiment would turn positive, with expectation of faster and smoother implementation of reforms now compared to earlier tenure of UPA.
• The financial institution would play a pinotal role in the attempt to revive the economy. We believe that measures like re-capitalization of weak banks would expedite, as these banks need capital to expand. We view this as a positive development for the banking space, especially for the bank requiring re-capitalization, as this would enable them to enter the growth trajectory.
• Further measures like rise in FDI limit in Insurance sector; Relaxation of cap on holding more than 10% in bank by single entity; Permitting equity dilution without reducing the government's ownership below 51% would see positive development.
• We remain positive on banks like SBI, UBI & BOB. We also believe that the bank have a capital contraint showed do well given the possibility of re-capitalization exercise gaining momentum.

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