Bank Nifty at record high

Market


MUMBAI : The Nifty bank index hit a record 41,840.15 on Thursday, surpassing its previous peak by a whisker, amid a month-long buying spree by foreign portfolio investors encouraged by the prospects of a sustained improvement in credit offtake and asset quality, and falling bond yields.

Most analysts were optimistic about its continued outperformance to the Nifty, which trades almost 4% below its record high of 18,604.45 last October. The Nifty Bank hit its previous record of 41,829.6 on 25 October last year.

Investor buying in heavyweight counters such as ICICI Bank and State Bank of India, which hit fresh lifetime highs, catapulted the sectoral index even as most stocks remained under pressure through the day.

ICICI Bank scaled a new intraday high of 936.65 before closing flat at 917.6 on the NSE, while SBI hit a fresh intraday peak at 578.5 before closing marginally in the green at 572.15 on a day Nifty fell 0.7% to 17,877.

ICICI has the second-highest weight (24.34%) on the 12-bank index after HDFC Bank (25.71%), while SBI is placed fourth (11.29%).

Banks have played a major role in the Nifty’s recent rally from its 17 June low of 15,183.4. While Nifty has risen almost 18% from 17,877 on 15 September, the Bank Nifty has risen 28% over the same period to 41,209.2. Financial services have a 36.96% weighting on the Nifty, followed by IT (14.22%), oil and gas (13.41%), FMCG (8.75%) and auto (6%).

A major part for the recent outperformance through June can be attributed to FII buying. Equity assets under custody of FPIs in financial services rose from $163 billion on 30 June to $190.6 billion on 30 August, NSDL data shows.

Rajesh Palviya, V-P (research) and technical head of Axis Securities, said the Bank Nifty had given a “breakout”, after consolidating within a 10,000-point range in the past 10 months. This signals it may “have a shy at 44,000-45,000 in the medium term, with 39,000 likely to act as a good support. FII buying is likely to continue after the steep fall between October last year and this June,” he added.

Siddarth Bhamre, research head at Religare Broking, said the Bank Nifty “would continue to outperform at least in the near term, given the fact that India remains an outlier in terms of global growth, pegged at 6-7% this year, even as recession and growth concerns loom over the US and China.”

To be sure, ratings agency Moody’s cut India’s CY22 real GDP growth forecast by 110 bps to 7.7% earlier this month, citing rising interest rates, uneven monsoons and slowing global growth. This is better than the 3.5% growth forecast for China.

ICICIdirect Research said the momentum in credit growth and operational performance is expected to continue, after sustained robust credit demand aided operational performance in Q1FY23.

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