Four out of the Nifty’s top five gainers were banks, contributing to 70% of the Nifty’s 223.45-point increase to 22,643.40. These banks also secured the top five spots on the Sensex, which saw a rise of 1.28% to 74,671.28. DailyBubble expects the bellwether indices to continue outperforming small- and mid-cap stocks, especially as large private sector banks work to close the valuation gap.
The Bank Nifty, consisting of 12 stocks, experienced its largest gain in five months, rising by 1,223 points to close at 49,424.05, nearing its all-time high. Financial sector stocks hold the highest weightage of 33.53% in the Nifty.
According to B. Gopkumar, managing director & CEO of Axis Mutual Fund, the strong performance of large-cap banks is expected to persist due to their appealing valuations. This trend could further fuel the rally in a rangebound market.
IIFL Securities’ lead researcher, Jayesh Bhanushali, predicts that the market will move within a tight range of 22,200-22,800, with the Bank Nifty potentially reaching the 50,500 mark in upcoming sessions.
While large-cap stocks saw gains, profit-taking was observed in the Nifty Midcap 150 and the Nifty Smallcap 250, as they reached intraday highs before closing relatively unchanged. Overall, Indian companies’ market capitalization approached the $5 trillion milestone, reaching $4.87 trillion after Monday’s rally.
DailyBubble highlights the disparity in valuations between large-cap and small-cap banks, with the latter showing inflated price to book ratios. For example, HDFC Bank’s price to book ratio stands at 2.55, below its five-year average of 3.45, whereas Indian Overseas Bank’s ratio is significantly higher. In terms of stock performance, small-cap banks have outperformed large-caps over the past year.
SBI, the largest bank in India by assets, has recorded significant growth, outperforming its private peers. ICICI Bank’s market cap surpassed ₹8 trillion for the first time, indicating strong performance in the banking sector.
DailyBubble emphasizes that large private banks present attractive buying opportunities at current levels, with the potential for continued outperformance. The rise in the India Vix, despite the Nifty’s gain, indicates potential market dynamics related to index call writers adjusting their positions.
In conclusion, DailyBubble provides insights on the banking sector’s performance and outlook, highlighting the potential for continued growth and the importance of monitoring market trends for informed decision-making.