Markets jump on banking stocks gain

Equities rallied on Tuesday for the second straight session ahead of the US Federal Reserve meeting and on strong global cues. The rally in the last two sessions has been led by the banking stocks after the outlook improved for their business. Nifty Bank rose as much as 3.17% on Tuesday. In the last two sessions it is up by 7.46%. Similarly on Tuesday, Nifty rallied by 144.35 points (1.24%) to close at 11,813.5 whereas the Sensex rallied by 503.55 points (1.27%) to close at 40,261.13.

The rise in the markets comes on the back of strong performance delivered by the financial stocks in the last two trading sessions.

The Nifty Bank was up by 3.17% on Tuesday with the biggest gainers on the index being ICICI Bank, State Bank of India, Federal Bank, IndusInd Bank, and HDFC Bank up by 6.61%, 4.23%, 3.1%, 2.81%, and 2.69%, respectively. Credit Suisse after the quarterly earnings of private banks upgraded its earnings by 20%. In its report, the investment bank, said, “Private banks now have NPL cover more than 75% and carry an additional 1% to 2% of loans as Covid-19 provisions.

Therefore, even as a post-moratorium pick-up in NPL slippage is likely in H2 FY21, we build in credit cost moderation from H2 FY21 for the larger banks (ICICI, Axis, HDFCB) and FY22 for IIB. This leads to a 15-25% upgrade to our FY22 estimates for ICICI, Axis and IIB, and ROEs recovering to nearly 13%. We upgrade IIB still trading at 1x book to Outperform and see 28%- 32% upside for ICICI & Axis trading at 1.4x book to our revised TP.”

Meanwhile, global cues have remained strong this week with the markets looking forward to the announcements coming out of the US Federal Reserve meeting. Positive economic data coming out of China and the US have also brought back the ‘risk-on’ sentiment globally.

The markets in European countries like Germany, France and the United Kingdom were up between 1.7% to 2%. Deepak Jasani, head – retail research, HDFC Securities, said, “European stock markets rose in early trading on Tuesday as investors bet on a clear win for Joe Biden as the United States votes in its most polarised presidential election in living memory.

A clear Biden win, where his party retains control of the House and wins the Senate, seems like the most positive outcome for markets.” The Asian bourses in China, South Korea and Hong Kong were up by 1.4% to 1.9%. During press time, the Dow Jones mini futures were up by 417 points.

The foreign portfolio investors on Tuesday bought Indian equities worth $307 million whereas domestic institutional investors sold stocks worth $148.7 million. The turnover on the futures and options segment stood at `15.08 lakh crore and the equity markets saw a turnover worth Rs 58,201.05 crore.

The biggest gainers on Nifty were ICICI Bank, Hindalco, State Bank of India, Powergrid Corporation and HDFC up by 6.61%, 4.95%, 4.23%, 4.02%, and 3.95%. The biggest losers on Nifty were UPL, NTPC, RIL, Adani Ports and SEZ, as well as Nestle India down by 6.6%, 3.76%, 1.22%, 1.2%, and 1.14%.