Four of Nifty’s five top gainers were banks, fetching 70% of the Nifty’s 223.45-point gain to 22,643.40. They also were the top five stocks on the Sensex, which rose 1.28% to 74671.28. Analysts expect the bellwether indices to outperform their small- and mid-cap counterparts, as large private sector banks close the valuation gap.
The 12-stock Bank Nifty rose 1223 points, the most in five months, to close at 49424.05, near its record high. During the day, it hit a record 49473.60, closing in on the psychological 50,000 mark. Financial sector stocks have the highest weight of 33.53% in Nifty.
“Large-cap banks have put up a solid showing, which is likely to persist given their attractive valuations,” said B. Gopkumar, managing director & chief executive officer of Axis Mutual Fund. “This could give more legs to the rally toward the upper end of a rangebound market.”
The market is expected to move in a tight 600-point range of 22,200-22,800, said Jayesh Bhanushali, lead, research at IIFL Securities. He expects the Bank Nifty to test the 50500-mark in the sessions ahead.
While large-cap stocks rose, profit-taking was seen in the Nifty Midcap 150 and the Nifty Smallcap 250, which touched intraday highs of 18861.2 and 15929.50, before closing little changed. Overall, Indian companies’ market cap approached the $5 trillion mark, reaching $4.87 trillion after Monday’s rally.
Small-cap valuations
Indeed, valuations of large-cap banks have trailed their small-cap counterparts, whose price to book value has ballooned. For instance, HDFC Bank’s price to book ratio stands at 2.55 against the five-year average of 3.45. Against this, smallcap lender Indian Overseas Bank’s current price to book stands at 4.78 against the historic average of 1.78.
The price to book ratio of ICICI Bank and Axis Bank stand at 3.18 and 2.27, against their five-year average of 2.71 and 2.04. State Bank of India, the country’s largest bank by assets, has a price to book ratio of 1.82, against the 1.25 historic average.
On the price front too, small-caps have vastly outperformed the large-caps. While the IOB stock has risen a whopping 166.27% rise to ₹68.70 over the past one year, HDFC Bank has fallen 9.36% to ₹1529.5. ICICI Bank has risen 26.42% to ₹1160.15, and Axis Bank has gained 34.8% to ₹1159.21 over the past year.
SBI, which hit a new record of ₹831.25 on Monday, has outperformed its private peers over the last year, rising 43% to ₹826.50. Monday’s 4.7% rally took ICICI Bank’s market cap above the ₹8 trillion mark— ₹8.12 trillion—for the first time.
“Large private banks are attractive buys at current levels, and their outperformance could continue,” said Swarup Mohanty, vice-chairman & CEO, Mirae Asset Investment Managers.
Interestingly, while the Nifty gained a percent, the India Vix, which normally shares an inverse correlation to the market, rose by 11.99%, to 12.24. According to IIFL Securities’ Bhanushali, this could be because of short index call writers or sellers covering their bearish bets and raising the call option prices in the bargain.
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Published: 29 Apr 2024, 09:28 PM IST