HDFC Bank Leads Bank Nifty to Record High, Posts Robust Loan Growth.
On July 3, HDFC Bank, which accounts for about 28.3 per cent of the Bank Nifty index, also hit an all-time high.
The Bank Nifty index jumped 2 percent to hit a fresh lifetime high of 53,201 on July 3
The Bank Nifty index rose 2 per cent and has remained stable after hitting a new peak of 53,201 on July 3. The rise was mainly driven by a 3-1/2 per cent rise in HDFC Bank, which is a significant component of the index with a weighting of 28.3 per cent.
The recent drop in foreign ownership below 55 per cent in the April-June period could lead to significant MSCI-driven inflows, which is likely to result in a doubling of HDFC Bank’s weighting in the upcoming August reshuffle of the MSCI EM index.
According to a BSE report, foreign institutional investors (FIIs) will hold 54.8 per cent of HDFC Bank shares by June 2024. This recent ownership structure allows foreign investors to hold more than 25 per cent of the company’s shares, which meets the criteria for a stock to be considered in the total market capitalisation weighting by index providers.
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services believes that the delivery-based buying in the stock witnessed in the last many days has the potential to continue for a few more days, pushing the stock higher.
Vijaykumar said that as HDFC Bank’s share in Nifty increases, ETFs and active funds will increase buying of shares through delivery.
Along with HDFC Bank , private lenders such as Axis Bank, Bandhan Bank, ICICI Bank, Kotak Mahindra Bank and Federal Bank also played a role in pushing up the Bank Nifty on July 3, registering gains ranging from 1% to 4%. Every component of the Bank Nifty index was trading in the positive territory on the morning of July 3.
The uptick followed as lenders started to post strong June quarter business updates, including Federal Bank’s total deposits rising 20 percent year-on-year (YoY) to Rs 2.6 lakh crore and gross advances growing 20 percent YoY to Rs 1.86 lakh crore.
Nuvama expects loan growth in the banking sector to remain robust, with most lenders reporting quarter-on-quarter growth.
Nuwama said, “Despite a traditionally slow first quarter, private banks are expected to see loan growth of 2-5% quarter-on-quarter, while state-run banks may experience 1-3% growth. PNB forecasts quarter-on-quarter loan growth of over 3%. Deposit growth remains constrained, with most banks expecting higher loan-to-deposit ratios (LDR) after an improvement in Q4FY24.”
