While the benchmarks ended flat on Wednesday, the Nifty Bank rallied 236 points (0.73%) to close at a record high of 32,574.65 points. The Nifty settled higher by 1.4 points to close at 14,564.85 while the Sensex declined 24.79 points (0.05%) to close at 49,492.32.
The Nifty Bank, which closed the previous trading session at its 52-week high, touched a new high on Wednesday and its biggest gainers were BoB, SBI, IndusInd Bank, Axis Bank and ICICI Bank, up by 6.5%, 4.6%, 1.56%, 1.53% and 1.46%, respectively.
The selloff in index heavyweights such as HDFC, RIL, HDFC Bank, Bajaj Finance and Kotak Mahindra Bank caused the benchmarks to give up on their gains and break their three-session record high streak. This is because investors chose to book profit after a 1.9% contraction in the factory output for November.
Market experts believe that the banking sector is poised for a recovery because of an overall economic recovery. Moreover, the business growth is expected to pick up, aided by a good festive season for Q3 results. Motilal Oswal Institutional Equities in its report said, “Overall, we estimate the business growth to pick up, aided by a good festive season, and expect the systemic loan growth at 4.5% for FY21. Private banks under our coverage are likely to grow relatively higher at close to 9% year on year.” The top picks of the brokerage are ICICI Bank, HDFC Bank, SBI and AU Small Finance Bank. However, experts have asked investors to remain cautious after the RBI has warned about the increase in NPAs in the banking sector.
FPIs bought stocks worth $250.5 million whereas domestic institutional investors sold stocks worth $316.02 million, according to provisional data on the exchange. So far in January, FPIs have bought stocks worth $1.92 billion.
Deepak Jasani, head – retail research, HDFC Securities, said: “Risks of sharp and sudden selloffs at high levels remain. One needs to be careful and keep long positions under control and keep taking profits on trading and some investment positions.”