Bank Nifty jumps 25% in 5 months, propels Nifty higher

Bank Nifty has gained 25 percent in the last five months to hit a record high of 30,496.05. In comparison, Nifty50 has risen 15 percent in the same period.

On March 28, Bank Nifty climbed 1.3 percent driven by Bank of Baroda, State Bank of India, Axis Bank, Yes Bank, RBL Bank, PNB, ICICI Bank and IndusInd Bank that rallied between 1-7 percent.

Axis Bank, RBL Bank, ICICI Bank, IDFC First Bank and HDFC Bank also hit their respective highs today.

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The rally in banks is on hope of rate cut in April policy meeting and recapitalisation of PSU banks, experts said.

The banking sector has seen a slew of regulations over the past 10-12 quarters that are envisaged to bolster the system. A few major changes introduced are: a) Insolvency & Banking Code (IBC) amendment; b) asset quality review; c) implementation of prompt corrective action; and d) numerous restructuring processes.

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“Besides these regulatory changes, we perceive a few more medium-to-long-term catalysts: i) perking up industrial activity to spur corporate loans; ii) aggressive recognition of bad assets and improving recovery to boost asset quality; iii) softening credit cost to propel return ratios; and iv) burgeoning share of retail term deposits to provide long-term stability to the source of funds,” Edelweiss said.

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Rusmik Oza, Head of Fundamental Research, Kotak Securities is also positive on the banking sector.

“There is value in most banking stocks. Within the banking sector our first preference is toward hardcore corporate banks followed by private sector banks,” he said.

He believes on Price-to-Book Value the sector is still far away from peak valuations and there is a case of valuations of banks to re-rate as RoEs of most banks is expected to improve in the next two years.
First Published on Mar 28, 2019 04:10 pm

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