Mumbai, Aug 18 (The South India Times): Nifty bank, which is comprised of the most liquid and large capitalized Indian banking stocks, is up 11.76 percent so far this year due to robust earnings growth of banks, return of foreign investors in Indian equities since July and attractive valuation.Currently ,the Nifty Bank index is trading at 39,656.15,as compared to 35,481.70 on December 31,2021.
The data compiled by Ceojit Financial Services showed the top three banks that have outperformed the inde< Yere Bank of Baroda with YTD returns of 47.90 percent, Federal Bank with 21.20 percent, and IndusInd bank with 21.10 percent.
On Thursday Kotak Mahindra Bank, Bandhan Bank, Federal Bank, State Bank of India, IndusInd Bank, HDFC Bank, AU Small Finance Bank, ICICI Bank, Axis Bank, PNB, IDFC First Bank, and Bank of Baroda were stocks in the Nifty Bank index.
The banking sector has demonstrated strong resilience so far this year supported by multiple factors.
- Strong quarterly earnings driven by robust credit growth margin expansion improved asset quality and lower provisioning.
- FEEs return to buying mode due to favorable economic factors.
- Attractive valuation. We believe that the rally is still in its early stages and that valuations have room to rise further, given improved fundamentals,” said Vinod Nair, Head of Research at Geojit Financial Services. According to the ICICI Securities report, banks under their coverage in Q1 FY23 reported 16 percent on-year and 2 percent on-quarter growth in net interest income.
Core operating profit grew 17 percent on year While treasury loss dragged operating profit loYer by 1S percent on the year and 18 percent on quarter. Subsid- ing credit cost and loYer base supported 35 percent on-year earnings growth. However, the earnings of SBI, HDFC bank, and Kotak Mahindra Bank lagged I-Sec expectations due to higher than anticipated treasury loss and elevated opex. G-sec yields surged 65 basis points from March to 7.5 percent till June and corporate bond yields by 70 basis points.
This created pressure on treasury profits for banks that dragged overall earnings growth. Having 25-60 percent of the Investment portfolio in AFS/HTM WITH 1-2 years of modified duration led to a treasury knock. Banks with relatively higher investments in corporate bonds (credit substitute) witnessed an above-expected hit.
