HDFC Bank powers Bank Nifty to all-time high, loan growth updates robust
The Bank Nifty index jumped 2 percent and continues to hold firm after hitting a fresh high of 53,201 on July 3, led by a 3-1/2 percent rally in index heavyweight HDFC Bank, on the back of potential MSCI-driven inflows as foreign ownership fell below 55 percent in the April-June quarter.
HDFC Bank - which carries around 28.3 percent weightage in Bank Nifty - also hit a record high on July 3. With foreign shareholding falling below 55 percent in the June quarter, analysts anticipate a potential doubling of the bank's weight in the MSCI EM index during the upcoming August reshuffle.
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According to BSE data, foreign institutional investor (FII) ownership in HDFC Bank stood at 54.8 percent as of the end of June 2024. The latest shareholding pattern increases the headroom for foreign ownership in the company to more than 25 percent, a necessary condition for the index provider to include a stock at its full market-cap weight.
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.
"As the weightage of HDFC Bank in Nifty increases there will be more delivery based buying by ETFs and also active funds," Vijayakumar said.
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In addition to HDFC Bank, other private lenders like Axis Bank, Bandhan Bank, ICICI Bank, Kotak Mahindra Bank and Federal Bank too contributed to Bank Nifty's rise on July 3, with gains ranging from 1 to 4 percent. All constituents of the Bank Nifty index were in positive territory during early trade on 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.
"Even in a seasonally weak Q1, loan growth will hold up with a 2-5 percent QoQ rise for private banks and 1-3 percent for state banks. PNB has guided for loan growth of 3 percent-plus QoQ. Deposit growth remains tight, with most banks likely to report higher LDR after the improvement in Q4FY24," the Nuvama note said.
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