Five stocks have hit record highs on the NSE: IDFC First Bank, ICICI Bank, HDFC Bank, RBL Bank and Axis Bank
The 13-stock index has rallied nearly 4,000 points since February 19, 2019, to hit a life high on April 1. Major gainers amongst them are PNB, Bank of Baroda, Yes Bank and IDFC First Bank that surged 30-42 percent.
The Bank Nifty witnessed long rollovers for April series and the open interest hit a six-month high whereas rollover cost has increased to 140 points on the back of long positions being carried forward.
“There was a surge in option premiums ahead of the RBI monetary policy meeting, which is lined up in the coming week. Looking at the huge OI open in 30,000 and 29,800 Put strikes, we feel the outperformance in the banking space should continue,” Amit Gupta, head of derivatives at ICICIdirect.
“In case of any profit booking, Put writers are likely to provide a cushion. We feel the index will remain above 30,000. The current price ratio of Bank Nifty/Nifty has moved above its two-year highs and made a new lifetime high,” he said.
Gupta is of the view that on the back of huge buying by FIIs in the cash segment, the outperformance trend in banking stocks is likely to continue. In the absence of any negative triggers from the policy, the Bank Nifty can test 30,800.
The Reserve Bank of India will deliver its rate decision on April 4 after its three-day meeting. Largely, experts expect a rate cut in policy meeting and feel that already priced in by the market hence the commentary is key to watch out for.
"Market has factored in 25 basis points cut and a change in stance to accommodative from neutral. Expected increase in liquidity and cut in interest rates auger well for the markets," VK Sharma, Head PCG & Capital Markets Strategy, HDFC Securities told Moneycontrol.
Keki Mistry, vice chairman and CEO of HDFC also said (in an interview to CNBC-TV18) RBI would cut the rate, but as far as the banking system is concerned, the banking system will have to grapple with the fact that their deposit growth has been lagging loan growth.
Meanwhile, global research house Deutsche Bank expects strong FY20/21 for banks. "ICICI Bank & SBI are top picks and we prefer banks over NBFCs despite expectation of lower rates."
Liabilities are critical but distribution is the key and large banks are well positioned, the research house said, adding above-average valuations for corporate banks should not be a deterrent.
After meeting with large banks, Elara Securities said it expects further margin improvement."Banks, primarily PSB and corporate-facing, expect further margin expansion, led by higher NPL recovery and lower fresh delinquency. Therefore, on net slippages, banks would witness interest income accruals versus interest income reversals in the past," he explained.