11/11/26, Banking shares led the market rally Today

Banking shares led the market rally on Wednesday, with the Nifty Bank surging over 1,653 points, or 2.76 percent to cross the 61,350 mark as easing crude oil prices improved investor sentiment towards domestic equities.

The strong buying in banking and financial stocks came as benchmark indices climbed to an eight-month high, supported by strong foreign fund inflows after a prolonged two-year period of outflows. Easing crude prices have also helped ease concerns over pressure on the rupee, a key consideration for overseas investors.

Analysts also attributed the rally to attractive valuations post the recent downtrend.

The Nifty Bank hit a high of 61,394.30, leaving the index nearly 350 points away from its all-time high.

Sunny Agrawal, Head - Fundamental Research at SBI Securities, noted that the valuations had turned attractive over the past quarters amid a downbeat market environment, especially for large-cap private sector banks.

"Strong systemic credit growth across segments, positive margins inflection underpinned by repo rate hikes, robust liquidity aided by FCNR (B) deposit accretion, and lower slippages resulting in benign asset quality are some of the other reasons for the recent banking sector rally," he added.

Brent crude futures fell to a two-month low of $89.16 per barrel in the previous session after US officials played down the possibility of further military action against Iran, easing concerns over potential supply disruptions.

Lower crude oil prices are seen as positive for the Indian economy, given the country's dependence on oil imports. A moderation in crude prices can help contain inflation, ease pressure on the current account and support the rupee. It can also provide the Reserve Bank of India with greater room to consider monetary easing, although the impact on interest rates and bank stocks would depend on the broader inflation and growth outlook.

Buying was broad-based across the 14 constituents of the Nifty Bank, with Bank of Baroda emerging as the top gainer, rising 6 percent.

Punjab National Bank and Federal Bank gained 4.71 percent and 4.21 percent, respectively. Among heavyweight lenders, Yes Bank, State Bank of India, HDFC bank, Kotak Mahindra Bank and ICICI Bank advanced up to 3.5 percent.

The rally also extended to other financial stocks, with the Nifty Financial Services index rising 2 percent, taking its monthly gains to 13 percent, so far.

Both public and private sector lenders participated in the buying. The Nifty Private Bank index gained 2.12 percent, while the Nifty PSU Bank index advanced 3.5 percent.

"Going ahead, we are constructive on large cap PVBs (ICICI, AXIS, HDFC), SMIDs (DCB, KVB, CUBK). We are selective in the PSBs and prefer Indian Bank," said Agrawal.

Report by Paras Bist

Disclaimer: The views and investment tips expressed by investment experts here are their own and not of us. We  advise traders and investors  to check with certified experts before taking any investment decisions.