Bank Nifty Could Continue Rising If Key Stocks Maintain Upward Trend, Say Analysts

There is more legroom for the bank index to notch higher if the sector heavyweight HDFC Bank Ltd. and other private peers breakout to new highs, market analysts said.

THe NSE Nifty Bank Index can scale closer to 52,800 and there is room to hit the 53,000 mark, Aditya Agarwala, head of research and investments at Invest4edu, told NDTV Profit. "HDFC Bank is yet to breakout to an all-time high territory, and when it does, you can see an extended rally. Axis Bank Ltd. also looks strong on the chart."

While state-run banks haven't participated in the rally yet, banking and NBFCs are in a good spot and there is room on the upside, he said.

The Nifty 50 will tag along the bank index, even as on its own, the benchmark may face hurdles at 23,800-24,000 level, he said, adding the market is currently seeing a sector-specific rally.

ICICI Bank Ltd. looks to be the best pick in the space on a relative fundamental valuation basis, said Dharmesh Kant, head of equity research at Chola Securites Pvt.

A rally in banking and financial stocks pushed India's benchmark equity indices to another record on Tuesday amid strong domestic cues. The NSE Nifty 50 hit a fresh record for the 34th time this year, while the 1,000-point journey of the S&P BSE Sensex to cross the milestone of 78,000 was done in 11 sessions.

The Nifty closed 0.78% higher at 23,721.30, while the Sensex ended 0.92% up at 78,053.52. During the day, the Nifty rose as much as 0.92% to 23,754.1, while the Sensex advanced as high as 1.06% to 78,053.5.

Kant said corrections haven't lasted more than 2-3 sessions in the last few months and new highs were scaled almost immediately. "It's a pure liquidity play. This boost is coming from retail sector through mutual funds; however, valuation looks stretched."

The market is now looking at monsoon progress over the country. "Next 15 days is crucial with focus on monsoon progress. The forecasts suggest next two weeks will have good rains to make up for the deficit in June so far. If that happens, there will be continuity in liquidity," he said.

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