The Banking Index Record Could Be A Harbinger Of New Highs In Nifty50 – Here’s Why

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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.

Banking stocks are back in vogue on Dalal Street as records from State Bank of India (SBI), ICICI Bank and Bank of Baroda propelled Nifty Bank’s run to an all-time high . The phenomenal run of the banking index – which tracks the performance of 12 major lenders in the country, including HDFC Bank, ICICI Bank, Kotak Mahindra Bank and Axis Bank – could be a harbinger of new all-time highs in the major indexes.
Financial services have the maximum weight in the Nifty50, followed by IT, which has been one of the worst performing spaces on Dalal Street since October 2021 – a month that saw the last of the records in both Sensex and Nifty after a liquidity driven rally that lasted around 18 months.

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

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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.

Shares of SBI have hit a number of highs recently, with the market value of the country’s largest lender by assets crossing the Rs 5 lakh crore mark for the first time on Wednesday. This cemented the bank’s position as the seventh largest company in the country by market capitalization, behind Reliance, TCS, HDFC Bank, ICICI Bank, Infosys and HUL.

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.

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