Nifty Bank touches record high post state elections, aids broader market gains

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The Nifty Bank Index today touched a record high of 46,484.45 points intraday, in line with the gains in financial stocks and broader markets. Gains were led by three state election results on Sunday coming in favour of the BJP, which bolstered the chances of the party winning the 2024 general elections.

“Banking stocks witnessed fresh buying following BJP’s strong show in state elections, which has bolstered expectations for political continuity in 2024. This augurs well for macro and policy momentum for India, which, at the moment, is seeing the highest growth among major economies – both in terms of GDP as well as corporate earnings. This in turn could boost financial and banking activities,” said Ajay Menon, MD and CEO of Broking and Distribution, Motilal Oswal Financial.

Today’s index surged 1,600 points or 3.7 per cent to touch the new high, surpassing the previous high of 46,369 made in July 2023. However, the index later pared some gains to end 3.6 per cent higher at 46,431.40. The Nifty Bank Index has gained over 7 per cent on a year-to-date basis.

All 12 Nifty Bank Index constituents, including three PSU banks and one small finance bank, ended 1.0-4.7 per cent higher on Monday. Private banks, especially HDFC Bank, ICICI Bank and Axis Bank, are analysts’ top picks.

“The Bank Nifty bulls made a strong comeback, surpassing the all-time high levels and dispelling the bearish sentiment. The momentum is anticipated to persist, with robust support identified at the 46,000-45,800 zone, serving as a cushion for the bulls. The ongoing momentum rally has the potential to propel the index higher towards the levels of 47,000-48,000,” said Kunal Shah, Senior Technical and Derivative analyst at LKP Securities

However, others said that Nifty Bank will have to sustain over the 44,444 levels to extend gains and move towards the price target of 47,000-47,500.

Analysts said that banking stocks have been underperforming in the last couple of weeks, and today’s recovery has added more momentum to the broader market, adding that banks’ valuations remain attractive given their healthy balance sheets, strong asset quality and robust credit growth.

“What is interesting is that the India VIX also shot up by 5 per cent. This huge rally has landed both Nifty and Nifty Bank in the overbought territory, and the market may soon see some profit booking. However, every dip should be seen as a buying opportunity as post the state-elections result, Nifty is all set for a big rally till the Lok Sabha elections of 2024,” said Sheersham Gupta, Director and Senior Technical Analyst at Rupeezy.