Shares to buy: The benchmark heavyweight banking and financial services suite is once again leading the way in the Nifty50 benchmark. And this time, foreign institutional investors (FIIs) are pouring in money after the relentless selling of Indian stocks over the past ten months. The banking index has outperformed the 50-scrip benchmark in recent weeks.
Bank shares perform better than expected
Kush Ghodasara, CMT, independent market expert, thinks bank stocks have fared much better than expected on the ground floor, with NIM rising for almost all front-line banks. He went on to say: “Second, the NPA has fallen dramatically, which has had a positive effect on earnings. Third, credit growth has picked up again with an improving economy and greater salary security, leading to high spending on short-term loans. Therefore, sectors look fundamentally stronger for the next two quarters. However, in terms of price, I feel like all the positives have been taken into account and that’s why we’ve seen almost 15-20 percent rally across all banking stocks in the past 21 sessions.”
Strong performance in Q1
Banks performed strongly thanks to healthy lending growth, pushing the cost of borrowing down in the quarter ended June 30. “For some banks, slippages were marginally high, but the overall NPA showed improvement. NIM has shown divergent performance across banks, but private banks have shown an improving trend, while public banks have shown a lower trend. NIMs depended on the pricing of both assets and liabilities. In general, assets with a higher EBLR will have a faster passthrough. We like larger banks versus medium-sized banks. We also expect larger banks to be well placed to mobilize deposits,” said Hemali Dhame, associate vice president of research, Kotak Securities Ltd.
Top Bank Stocks to Buy
Vikram Kasat- Head Advisory, Prabhudas Lilladher Pvt Ltd. recommends Axis Bank and DCB.
DCB – Target price Rs 120
Asset Quality Risk Gradually Decreases – While gains on NII (slower passthrough) and gross slippages (due to seasonality) were not achieved, trends in both are expected to reverse. We remain constructive on DCB as asset quality risks diminish. Maintain multiple at 1.0x FY24 ABV with target price 120.
Axis Bank – Target Price Rs 940
Revaluation to depend on continued NIM strength. Asset Quality improved QoQ with controlled net slippages and reduction in stressed pool. Valuations of 1.7x on FY24 ABV are reassuring and the discount for ICICIBANK should ease as the RoE may rise from 12.0 percent to 14.5 percent. Maintain multiple at 2.3x FY24 ABV and target price at Rs 940.
Dhame, said: “We prefer large banks and medium-sized banks for higher risk appetite as the credit cost concerns are over. We like ICICI Bank, SBI Bank, Axis Bank, Federal Bank.
The expert opinions and investment tips in this News18.com report are their own and not the website’s or its management. Users are advised to contact certified experts before making any investment decisions.
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