This heavyweight sector tops Diwali recommendations’ list as fortune changes

In 2022, domestic benchmark indices Nifty 50 and Sensex have given moderate returns to Dalal Street investors, but the heavyweight sector that likely made up for this is banks.

The Nifty Bank index has gained nearly 16% year-to-date, and hit a lifetime high of 41840.15 points in September. However, Nifty50 and Sensex have gained a little over 1% in the same period.

Shares of most banks have outperformed the market, with many of the frontline as well as midcap stocks giving double-digit returns.

Within the pack, public-sector banks have outperformed their private sector peers. While Nifty Private Sector bank Index has gained over 17% so far in 2022, Nifty PSU Bank has surged more than 34%.

The stellar gains notwithstanding, the sector remains a favourite and tops the recommendation list for most brokerages.

One of the major reasons driving the shares of banks are their improving earnings, particularly on the asset quality front.

Asset quality of private as well as state-owned banks has improved significantly as compared to the levels seen a couple of years ago.

Furthermore, a strong revival in demand in the retail sector such as housing, automobile and unsecured loans has driven credit growth higher. Most banks have reported double-digit growths in loan books during the September quarter.

According to Axis Securities, banks will be one of the major themes that will play out in 2023, and it has

as one of its preferred picks.

“We believe the stock is poised for re-rating given the continuous improvement in the bank’s asset quality, its strategy to improve operating performance with expected operating leverage and superior return ratios over FY23-25E,” it said in a report.

The brokerage’s target price for the stock is Rs 70, implying a 24% upside from current levels.

Brokerage Kotak Securities sees banks and financials to be among the major contributors to growth in Nifty 50 earnings in FY23 and FY24.

Within the mid-cap space, the other stock that has grabbed interest is

. Angel One, Axis Securities and have listed this stock as their Diwali pick. They see 15-40% for the stock from the current level.

Among large-cap banks,

, , , and are the preferred stocks for analysts.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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