That apart, while ICICI Bank and The Federal Bank gained 1 per cent and 0.25 per cent, respectively, all other Nifty Bank constituents declined in the range of 0.11 per cent and 12 per cent. The Nifty Bank index too slipped 0.31 per cent, data show.
"The current buying in the sector is largely due to sectoral rotation as there aren't any specific fresh triggers for the sector... Credit growth, reported bad loans in the March quarter, and macro-situation are same as before. Therefore, today's buying can't be attributed to a specific reason," says Deepak Jasani, head of retail research at HDFC Securities.
Another section of analysts opine that Monday's rally in banks is a sign of investors digesting decline in Covid-19 cases. "On Monday, India reported 281,386 fresh cases taking total infections to 24,965,463. New cases fell below 300,000 for the first time in 25 days as the country seeks to scale up vaccinations. Investors are seeing this as an early sign of Covid cases peaking out which could limit the dent on the financial sector," says Ajit Mishra, VP Research at Religare Broking.
The second wave of infections in India has been several times more virulent than the first. While there is no surety about the infection trajectory, the current lockdown now is restricting movement of people more than goods. High-frequency data show that the second wave is impacting India's economic activities, but the extent is far less than in the initial days of the pandemic as most economic activities are now allowed with some restrictions along with faster technology adaptation, innovations, productivity improvements and support from the government.
"The second wave of infection is likely to soften India's GDP and corporate earnings growth in FY22 without any major impact on longer-term prospects. This may cause near-term volatility in the Indian equity market and a temporary outflow of foreign portfolio investment. Yet, barring unforeseen negative developments, a large equity-market correction looks unlikely. We expect no major inflationary risk in FY22, and this would aid continuation of the easy-monetary policy and low interest rate. Therefore, we continue to prefer financials as an investment theme," says Sujan Hajra, chief economist at Anand Rathi Shares.
On a year-to-date basis, bank stocks
have traded mixed at the bourses. Shares of IDFC First Bank, SBI, ICICI Bank, PNB, Axis Bank, and AU Small Finance Bank have advanced between 10 per cent and 46 per cent on the NSE while those of Kotak Mahindra Bank, HDFC Bank, Bandhan Bank, and RBL Bank have declined up to 30 per cent. In comparison, th Nifty50 and the Nifty Bank indices are up 5 per cent and 3 per cent, respectively.
"Q4 earnings were largely in-line with expectations. Moreover, concerns that the current restrictions may not have a significant impact on the growth are playing out. Therefore, what we are seeing in the financial space is value-based buying... If the situation on the moratorium front remains curtailed and if the NPAs don't rise significantly in Q1/Q2 of FY22, then we would be in a position to say that worst is behind for the sector," adds Gaurang Shah, senior VP at Geojit Financial Services.
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