Interest rate sensitive stocks to gain
Outperformance of the Bank Nifty over the benchmark Nifty may extend in the near to medium term.
The outperformance of the Bank Nifty over the benchmark Nifty may extend in the near to medium term. The Bank Nifty has outperformed the Nifty by 4 per cent in the past one month. In turn, the continued interest of investors for the banking stocks is likely to support the Nifty performance as the banking, and financial services have more than one-third weight in the Nifty. The price ratio of the Bank Nifty with the Nifty is currently 2.6, the highest in five years, compared with a five-year average of 2.3.
Analysts expect predictability in policies and that fear of more dosage of populist cash transfer and loan waivers may probably decline. This is reflected in the easing of the 10- year government bond yield, which dropped by six basis points to 7.2 per cent, the lowest since April. Also, the one-year interest rate swap fell to 5.87 per cent that increases the probability of an interest rate cut in the coming RBI policy meet. The continuation of NDA’s policies may also mean that the low-inflation regime would continue.
The stocks of corporate lenders including Axis Bank, ICICI Bank and State Bank of India have gained by 15-26 per cent over the month. The Nifty Bank index was nearly 1 per cent higher at 30,794 during the afternoon trade.