Private sector banks, especially ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank and IndusInd Bank, have lifted the National Stock Exchange (NSE) banking share index Bank Nifty to record highs.
The Bank Nifty, a gauge for banking shares, hit 14,000 for the first time on Monday, surpassing its earlier high of May 2013, on optimism that Narendra Modi led Bharatiya Janata Party would form the government at the Centre.
The Bank Nifty has outperformed the market by surging 2.9% on Monday to 14,152, as against a 1.8% rise in CNX Nifty, which also touched an all-time high of 6,988.25. The banking index has surged nearly 9% in the past two trading sessions against a 4.8% rise in benchmark index and 6.7% in CNX PSU Bank index.
However, CNX PSU Bank, which rallied 45% in the past three months to 3,170, is still far away from its lifetime high of 5,376 touched in November 5, 2010. The public sector undertakings (PSU) banks, including State Bank of India (SBI), Punjab National Bank, Oriental Bank of Commerce, Bank of India, Dena Bank and Bank of Baroda are currently trading 20-60% off their all-time highs touched in November 2010.
According to analysts, an improvement in economic environment and a stable government could lead to re-rating in banking stocks.
"A marginal recovery in GDP largely prices in gains in state-owned bank shares from February's lows and further gains would push expectations to “over-optimistic levels,” a Bloomberg report suggests, quoting Seshadri Sen analyst at JPMorgan.
A sustainable recovery in state-owned banks' valuations has to be supported by “strong decline in incremental delinquencies -- we think that will need to economy to recover to 6.5%-7%, “ the report added.
The Bank Nifty, a gauge for banking shares, hit 14,000 for the first time on Monday, surpassing its earlier high of May 2013, on optimism that Narendra Modi led Bharatiya Janata Party would form the government at the Centre.
The Bank Nifty has outperformed the market by surging 2.9% on Monday to 14,152, as against a 1.8% rise in CNX Nifty, which also touched an all-time high of 6,988.25. The banking index has surged nearly 9% in the past two trading sessions against a 4.8% rise in benchmark index and 6.7% in CNX PSU Bank index.
However, CNX PSU Bank, which rallied 45% in the past three months to 3,170, is still far away from its lifetime high of 5,376 touched in November 5, 2010. The public sector undertakings (PSU) banks, including State Bank of India (SBI), Punjab National Bank, Oriental Bank of Commerce, Bank of India, Dena Bank and Bank of Baroda are currently trading 20-60% off their all-time highs touched in November 2010.
According to analysts, an improvement in economic environment and a stable government could lead to re-rating in banking stocks.
"A marginal recovery in GDP largely prices in gains in state-owned bank shares from February's lows and further gains would push expectations to “over-optimistic levels,” a Bloomberg report suggests, quoting Seshadri Sen analyst at JPMorgan.
A sustainable recovery in state-owned banks' valuations has to be supported by “strong decline in incremental delinquencies -- we think that will need to economy to recover to 6.5%-7%, “ the report added.
| Price on NSE | ||||
| Bank | ATH* | Latest | ATH Date | %chg |
| Dhanlaxmi Bank | 212.20 | 37.90 | 28/10/2010 | -82.14 |
| United Bank (I) | 150.00 | 34.95 | 26/10/2010 | -76.70 |
| Central Bank | 212.14 | 54.15 | 08/11/2010 | -74.47 |
| I O B | 227.45 | 62.40 | 07/01/2008 | -72.57 |
| Punjab & Sind Bank | 146.70 | 46.50 | 30/12/2010 | -68.30 |
| St Bk of Mysore | 1271.39 | 408.00 | 25/08/2010 | -67.91 |
| IDBI Bank | 202.25 | 70.60 | 11/11/2010 | -65.09 |
| Canara Bank | 844.20 | 294.70 | 09/11/2010 | -65.09 |
| Andhra Bank | 189.90 | 66.35 | 28/10/2010 | -65.06 |
| Corporation Bank | 814.30 | 287.55 | 03/11/2010 | -64.69 |
| Union Bank (I) | 426.95 | 151.30 | 27/10/2010 | -64.56 |
| Allahabad Bank | 271.95 | 96.45 | 11/11/2010 | -64.53 |
| Vijaya Bank | 115.35 | 41.40 | 11/11/2010 | -64.11 |
| DCB Bank | 169.90 | 63.00 | 06/12/2007 | -62.92 |
| St Bk of Travancore | 1083.00 | 406.65 | 25/08/2010 | -62.45 |
| Bank of Maha | 96.75 | 38.00 | 07/01/2008 | -60.72 |
| Indian Bank | 316.25 | 125.60 | 07/10/2010 | -60.28 |
| Dena Bank | 151.00 | 64.00 | 11/11/2010 | -57.62 |
| Bank of India | 589.00 | 252.90 | 07/10/2010 | -57.06 |
| St Bk of Bikaner | 782.74 | 361.80 | 25/08/2010 | -53.78 |
| *ATH - All-time high | ||||
| Price as at 1250 hours. | ||||