Stocks to Buy: The benchmark heavyweight banking and financial services pack is once again powering the upmove in the Nifty50 benchmark. And this time, foreign institutional investors (FIIs) are pouring in money after the relentless selling of Indian shares in the past 10-odd months. The banking index fared slightly better than the 50-scrip benchmark in the past few weeks.
Banking Stocks Performing Better Than Expected
Kush Ghodasara, CMT, independent market expert, thinks that banking stocks have been performing much better than expected on ground level with NIM increasing for almost all front-line banks. He further said: “Secondly, NPA has come down drastically which has had a positive effect on profits. Thirdly, credit growth has risen again with the economy recovering and salary security getting stronger which has resulted in high spending on short-term loans. Therefore fundamentally sectors look stronger for next two quarters. However, price wise I feel all the positives have been factored in and that is why we saw almost 15-20 per cent rally on all banking stocks in the last 21 sessions.”
Strong Performance in Q1
Banks have had a strong performance driven by healthy loan growth, reducing credit costs in the quarter ending June 30. “Slippages were marginally high for some banks, but headline NPA showed improvement. NIM have shown varied performance across banks, but private banks have shown improving trend whereas public banks have shown lower trends. NIMs were dependent on pricing of both asset and liabilities. In general, asset with higher EBLR will witness faster passthrough. We like larger banks versus mid sized banks on this. We expect larger banks favourably placed in deposit mobilization as well,” Hemali Dhame, associate vice-president research, Kotak Securities Ltd.
Top Banking 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 diminishing – While earnings were miss on NII (slower passthrough) and gross slippages (due to seasonality), trends in both are expected to reverse. We continue to remain constructive on DCB as asset quality risks are abating. Maintain multiple at 1.0x FY24 ABV with Target Price 120.
Axis Bank – Target Price Rs 940
Re rating to hinge on sustained NIM strength. Asset Quality improved QoQ with controlled net slippages and reduction in stressed pool. Valuations at 1.7x on FY24 ABV is comforting and discount to ICICIBANK should narrow as RoE may enhance from 12.0 per cent to 14.5 per cent. Maintain multiple at 2.3x FY24 ABV and Target Price at Rs 940.
Dhame, said: “Our preference is a preference on large banks, and mid-sized banks for higher risk appetite as credit cost worries are behind. We like ICICI Bank, SBI Bank, Axis Bank, Federal Bank.”
The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
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