Shares of state-owned banks are feeling the heat of mounting non-performing assets, as evident from their underperformance compared to the benchmark Nifty-50 over the last year. All indications are that the economy will slow further; the RBI has already lowered its forecast for the current financial year’s GDP growth to 6.5% from 7.3% earlier. And with monsoon now officially deficient, there is little reason to hope for inflation cooling any time soon, which in turn means a low probability of the RBI cutting interest rates. Investors are worried that the proportion of NPAs will only mount in the coming days.
Chart: Nifty Vs CNX PSU Bank Index Price Performance in last 1 year