Bank Nifty makes new all-time high for 2nd day straight, tops 44,000; will it hit 45,000 in near-term-

Bank Nifty makes new all-time high for 2nd day straight, tops 44,000; will it hit 45,000 in near-term?

NSE’s Bank Nifty index hit a record high for the second consecutive session today, topping 44,000-mark in the morning trade, and maintaining above 44,100 later in the day. The index has outperformed the benchmark index NSE Nifty 50, gaining almost 24% year-to-date. Banking stocks’ outperformance has also buoyed the market, on the back of easing monetary policy cycles, a pick up in economic activity and cooling inflation.Bank Nifty’s outperforms as PSU banks improve NIMs, asset quality

“Since July 2022 Bank Nifty has moved more than 30% and PSBs helped it a lot in this dream run. Banking stocks have generated exceptional returns over the past two to three months, since banks, PSU banks in particular, are going through a cycle of excellent credit growth, good NII growth, good NIMs, while cleaning up their balance sheet. There may be further momentum that might continue in these stocks,” said Naveen Mishra, Senior Research Analyst – Equity Research, CapitalVia Global.

Private banks commanding higher valuations

Since the hike in the interest rate rates as a result of RBI hiking the repo rate, several private banks are getting higher valuations, especially since they continue to improve their return ratios against larger private banks. The larger banks have usually had a historically high asset quality ratio, but the valuation has now stabilised as banks expect a rise in cost of funds over the next few quarters, said Anmol Das, Head of Research, Teji Mandi.

Bank Nifty Outlook

“We believe banking sector indices, including both Private & PSU Banks index, will keep outperforming broader market indices for the next 1 year or so. This is due to the re-ratings currently in progress for all the earlier non-rated PSU banks which are on an asset quality improvement path leading to the overall improvement in their return on assets quarter after quarter,” said Anmol Das, Head of Research, Teji Mandi. “Bank Nifty, and it is continuing its leadership aggressively. The fundamentals are also supporting the move in the banking index, and the outperformance is likely to continue for the next few quarters,” added Santosh Meena, Head of Research, Swastika Investmart.

“We expect this outperformance for banks and the tailwind for the sector to continue for 2023. In the short term, after yesterday’s inflation print in the US, there is an expectation in some quarters that the US Fed might turn less hawkish in the upcoming policy, which will support the markets,” said Nishit Master, Portfolio Manager, Axis Securities PMS.

Bullish movement in bank shares can take Bank Nifty to 45,000

“Overall Bank Nifty is looking positive and comfortably sustaining above 44,000, so further upside movement can be seen. The strong bullish movement in banks can take Bank Nifty up to 45,000 in near term,” according to Naveen Mishra, Senior Research Analyst – Equity Research, CapitalVia Global. Santosh Meena believes that “44,200 is an immediate hurdle, and 44,700/45,000 are the next resistance levels. On the downside, 43,500 is an immediate and strong support at any profit booking, and 42,000 will act as a base at any correction”.