Record highs in stocks such as SBI, ICICI Bank and Bank of Baroda have created exactly that in Nifty Bank: a (highly anticipated) record. Many prominent Dalal Street voices read this as a harbinger of new highs in the Nifty50 stock index.
Andrew Holland, CEO of Avendus Capital Alternate Strategies, expects the momentum in banking stocks to continue on Dalal Street. “The banking sector will be one of the clear beneficiaries of our economic growth, and now is the time to buy,” he said. CNBC-TV18.
Here’s what’s contributing to the surge in bank stocks
Analysts said the banking space is underpinned by healthy loan growth, upbeat comments from management and approvals from brokerages.
“Nifty Bank could outperform the market over the next 6-8 months, given its year-to-date outperformance against the market…SBI has already become the seventh largest company by market value” , AK Prabhakar, Head of Research at IDBI Capital The markets, told CNBCTV18.com.
Giving the rationale for his optimism, Prabhakar said, “If the banking segment grows by 15%, stocks are not valued for that growth.”
RBI data released over the weekend showed that credit growth at the country’s commercial banks – a key measure of demand for financial institutions – hit a nearly nine-year high of 15.5 % during the week ended August 26.
The data comes at a time when lenders are hoping for a pick-up in business momentum following aggressive COVID-era interest rate hikes and the start of the holiday season, which generally supports consumer demand, because people tend to borrow more.
SBI is seeing consistent loan growth across all retail segments, its president Dinesh Kumar Khara told CNBC-TV18 in an exclusive interaction last week, sounding confident that his bank will complete clock loan growth of at least 15% in the year ending March 2023.
“We have very clear visibility of the demand, which is there, and hopefully in the future, as the busy season begins, and of course already the festival season has started, I’m quite confident that we will continue to have decent retail growth,” Khara said.
Meanwhile, Morgan Stanley maintained an “overweight” rating on SBI and IndusInd, with target prices of Rs 675 and Rs 1,400 each respectively.
“Bank Nifty is driven by strong fundamentals. Bank credit growth of around 16% and non-performing bank assets (bad loans) at a 10-year low are adequate positive triggers when a strong recovery is underway. “VK said. VijayakumarChief Investment Strategist at Geojit Financial Services.
He also pointed out that bank stocks were depressed by relentless FII selling from October 2021 to July this year.
“Now that FIIs have joined the party, bank stocks are getting their due. India’s capacity utilization surpassing 75% and green shoots from an investment cycle also bode well for bank stocks. “, did he declare. CNBCTV18.com.
Can bulls expect new lifetime highs in Nifty50 anytime soon?
Vijayakumar believes the current market momentum, backed by Nifty Bank, looks strong enough to take the leading indices to new all-time highs.
However, here is a word of warning. “The global risk environment and high valuations in India are cause for concern,” he said.