The Q3 results were bad at least to the PSU banks.

The net profit of SBI, the country's largest lender, plummeted by 61.6 per cent to Rs. 1,115.34 crore for the third quarter as compared to Rs. 2,910.06 crore in the same period a year ago. Bank of Baroda reported a whopping loss of Rs. 3,342 crore, the highest ever quarterly loss posted by any public sector bank in the industry.

UCO Bank reported a net loss of Rs. 1,497 crore, followed by Indian Overseas Bank (Rs. 1,425 crore), Central Bank of India (Rs. 837 crore) and Dena Bank (Rs. 663 crore). Banks which posted sub-Rs. 500 crore losses were Kolkata-based Allahabad Bank (Rs. 486 crore loss), Oriental Bank of Commerce (Rs. 425 crore loss), Corporation Bank (Rs. 383 crore loss) and Syndicate Bank (Rs. 120 crore loss).

Reserve Bank of India (RBI) had directed the banks to classify visibly stressed assets as non-performing assets (NPAs) and set aside money to cover the risk of default. This in turn has forced the banks to show higher NPA and the RBI Governor Raghuram Rajan said a "deep surgery" is needed to clean up the balance sheets and the process of recognizing the NPA is akin to an "anesthetic" needed for the procedure.

At this stage, we can only recall the financial crisis of year 2008. American financial crisis dragged down the entire global economy. That time Indian banking system was believed to be sound; year 2016 exposes how strong our banking system is. The correction we had experienced in this year is surely not only owing to the external system but  also to our internal ones. We cannot expect the market to move up when our PSU banks has so much NPA which has to be compensated by the Government of India. Instead of expecting an up move we have to first allow some time to rectify the system otherwise it may haunt our economy forever.  The market may go down further and hence we may help the media to find new reasons for the downtrend. Media may research and invent new funny reasons for the current market turmoil and we should appreciate them for their innovative thinking.

Last week there was a rumor that the government may increase the time limit with respect to the calculation of long-term capital gains tax in equity.  The rumor that the ‘long-term’ may be raised from one year to three years has created panic in the minds of investors.   The mean duration of holding period by US investors was around 7 years in 1940. The average holding period had fallen to under 2 years by the time of the 1987 crash. By the turn of the century it had fallen to below one year. It was around 7 months by 2007. In UK the average duration has fallen from around 5 years in the mid-1960s to less than 7.5 months in 2007. Over the past 15 years even in international equity markets, holding periods have fallen. In India we do not have the data but we are sure the holding period will be much less than the advanced countries, as investors treat stock market as casino and they expect their money to grow at faster rate. Under this circumstances if the FM increases the holding period for the computation of long term tax the market would touch abysmally low level as it would affect the sentiments of the real market makers.

In this week we do not expect much from the market till some clarity emerges on how India would progress ahead.