Nifty and Bank Nifty Outlook
A cursory look at the comparative chart of Nifty and Bank Nifty shows a start difference in the growth pattern. From this it looks quite difficult for the Banking Sector to grow at the same rate as of Nifty. In spite of the bullish sentiments Bank Nifty is finding it hard to sustain above 23000 in the last few months.
A one year chart clearly indicates the under performance as most have not risen as fast as other scrips.
Why ?
- Reliance Industries has higher weightage which has grown 100% + during the last 12 Months
- IT stocks have grown rapidly post March slide to trade near year highs
- Pharma sector has attracted maximum investments owing to the pandemic and increased focus on exports
- Banks have overhang of NPAs and most of the banks are not likely to grow at a faster clip
- All Banks have had QIPs raised substantial money from Institutional investors and hence they may not buy further stake in Banking stocks in the near term.
The graph clearly indicates the divergence and the widening gap between Nifty and Bank Nifty which is likely to be pronounced with the market focusing on other sectors while Financials will languish due to supply overhang.
Outlook :
Bank Nifty can go beyond 25000 post Q2 results and improved realizations and reduced NPAs as the economy will bounce back sharply in coming 4 months till Dec.
Nifty is looking set to capture 15000 and will do much better when compared to Bank Nifty.
Raghav
Equty Research Analyst
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