Nifty Bank nears 52K mark as private banks lead rally

Nifty Bank nears 52K mark as private banks lead rally

Sonam Srivastava, founder and fund manager at Wright Research, said Bank Nifty’s recent surge to near 52,000 reflects a confluence of positive factors for the banking sector.

NEW DELHI: The Nifty Bank, an index of India’s top 12 banking stocks, rallied more than 1,000 points on Wednesday to hit a fresh record as multiple brokerages and research firms anticipate private banks to outperform the broader market and see improvement in their earnings. The sharp surge in Nifty Bank was led by heavyweight - HDFC Bank - which gained more than 3% on the bourses.

Closing in on 52,000 level, the index made an intraday high of 51,957, surpassing its previous record high of 51,133 achieved on June 3, a day before the outcome of the General Election. On the poll result day (June 4), it had declined over 4,000 points to 47,000 level.

Nifty Bank finally settled at 51,398.05, up 957.15 or 1.9% on Wednesday. While HDFC Bank was responsible for half of the movement, the other major contributors were ICICI Bank (up 2%) and Axis Bank (up 3%). In contrast, benchmarks – Nifty and Sensex – closed flat on Wednesday after hitting all-time high intraday.

Sonam Srivastava, founder and fund manager at Wright Research, said Bank Nifty’s recent surge to near 52,000 reflects a confluence of positive factors for the banking sector. “A strengthening economy, robust corporate earnings, and rising credit demand are likely contributors. However, future performance hinges on continued economic growth and managing potential headwinds like rising interest rates and global market volatility,” he added.

He further said the outlook for Bank Nifty is cautiously optimistic, but close monitoring of these economic indicators is essential for informed investment decisions.

Kunal Shah, senior technical & derivative analyst at LKP Securities, said the momentum is likely to continue, with immediate support at 51,000-50,900 zone. The index remains in a buy mode, and dips should be bought aggressively for targets of 52,100-52,600, added Shah. Analysts at CLSA recently said prospects of banks are bright and they have much stronger balance sheets today compared to five or ten years ago.

“They are not only well-capitalised but also have the lowest net NPAs in over a decade. The quality of corporate credit has improved over past 5-7 years. The sector has seen a rebound in profits and profitability, with RoE in FY24 being the highest since FY11,” said CLSA.

Nifty Bank hits fresh high

Major contributors in Wednesday’s rally

  • HDFC Bank: 471 points

  • ICICI Bank: 220 points

  • Axis Bank: 143 points

Biggest gainers in the Index

  • HDFC Bank: 3.11%

  • Axis Bank: 2.92%

  • ICICI Bank: 1.92%

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