Financials contribute 50% of over 2,000 point Sensex rally in eight days

Between January 15 and January 23, FIIs pumped Rs 9,226 crore into equity markets

Financial stocks have contributed a little more than half to the benchmark Sensex’s rally of about 2,000 points in the past eight trading sessions. Five stocks — HDFC, ICICI Bank, HDFC Bank, Axis Bank and State Bank of India (SBI) — collectively contributed 1,201 points to the Sensex’s rise since January 15, data showed.

The Sensex, which closed at 29,571 on Tuesday, has risen by 2,224 points, or 8.13 per cent, compared with 27,347 on January 14. On Tuesday, the index scaled a new high of 29,619 during intra-day trade.

Between January 15 and January 23, foreign institutional investors pumped in Rs 9,226 crore into equity markets. During this period, total investor wealth increased by Rs 5.33 lakh crore. In terms of the total market capitalisation of all companies listed on the BSE, the overall investor wealth in the Indian stock market stood at Rs 104.11 lakh crore on Tuesday, against Rs 98.78 lakh crore on January 14.

“Private banks have been steady financial performers. As a result, investors have preferred these banks to their public sector counterparts. Second, the rate cut announced recently is having a positive impact on these stocks. Third, most of these banks have subsidiaries in the form of insurance companies and broking arms. There is a possibility there is some value unlocking in case they get FDI (foreign direct investment) in insurance. This is a trigger for some of these companies,” said K Subramanyam, assistant vice-president (institutional research), Asit C. Mehta Securities.

HDFC, the largest contributor to the 30-share Sensex, has accounted for 363 points in the index’s gain. ICICI Bank contributed 320 points, followed by HDFC Bank (247 points), Axis Bank (181 points) and SBI (91 points).

From the non-financial segment, Larsen and Toubro (217 points), Tata Motors (179 points) and Reliance Industries (106 points) contributed more than 100 points each to the Sensex’s rally. Sun Pharmaceutical Industries, Bharti Airtel and ITC contributed 75-90 points during the period.

Since January 15, the stocks of HDFC, ICICI Bank, HDFC Bank, Axis Bank and SBI have appreciated 8-18 per cent, after Reserve Bank of India (RBI) Governor Raghuram Rajan unexpectedly cut the benchmark repurchase rate by 25 basis points to 7.75 per cent.

Axis Bank, which recently announced its December quarter results, impressed the Street on most parameters. Against analysts’ expectations of around Rs 1,100 crore of additional restructured assets, the bank added a mere Rs 132 crore due to reduced stress in the mid-corporate segment, a pressure point for some time, reports suggest.

“Axis Bank’s pre-provisions profitability continues to be one of the strongest among banks. Further, falling bond yields will continue to provide additional tailwind to earnings. The capital is comfortable to take advantage of growth opportunities. Maintain ‘outperform’ rating,” Ashish Gupta, Prashant Kumar and Kush Shah of Credit Suisse said in a post-results note.

In the short term, analysts say, banking stocks might appear stretched but a deep correction in these doesn’t look likely. “I think most of these stocks will be bought into till the Budget in February and there could be a possible correction after that. I suggest partial profit booking in these counters,” Subramanyam adds.