CNX Bank Nifty rose 5.5% on Friday, led by private sector lenders such as ICICI Bank, HDFC Bank, Yes Bank and Axis Bank. All 12 banking stocks that constitute the Bank Nifty ended higher.
ICICI Bank rose 7.2% to its highest level in more than six-and-a-half years. More than 67.76 lakh shares were traded on the BSE and the NSE, up 2.344 times the five-day average volume and up 1.96 times the average volume in the previous 30 sessions. Market experts with whom FE spoke to said that many global institutional investors are optimistic of a Narendra Modi-led BJP victory. Brokerages continue to remain overweight on cyclical stocks on hopes that the new government will revive the economy with infrastructure spending.
Macquarie, the Australian global investment banking and diversified financial services group, has further increased its overweight position in the shares of financials and industrial companies.
Investors appear to have taken some money off the table as they wait for the final results. However, once a clear indication of a stable government emerges, which is our base case, markets can go up further. We increase our overweight in financial and industrials, and believe the drivers of a possible rally post election results next week could continue to be cyclical sectors, said Rakesh Arora, managing director & head of research, Macquarie Capital Securities India.
HDFC Bank (5.6%), Axis Bank (6.2%) and Kotak Mahindra Bank (5.3%) all rose to their lifetime highs. Yes Bank was the top gainer with 9.34% gains.
More than 43.35 lakh shares of HDFC Bank were traded on the bourses, up 2.65 times the five-day average and 1.81 times the 30-day average. Other banking and financial institutions also saw similar surge in volumes.
State-owned banks witnessed buying on hopes the economic recovery will resolve the asset quality problems. The country's biggest lender, State Bank of India (SBI), gained 4.41% on the NSE, while Punjab National Bank rose 4.75%, Bank of India advanced 4.36% and Canara Bank advanced 3.66%. Bank of Baroda ended up 2.72%. UBS Securities' head of India research, Gautam Chhaochharia, sees the market moving higher on FII buying. He also sees further room for overseas funds to buy Indian equities.
FIIs are adding cyclicals, selling consumers... Even DIIs, who continue to see outflows and remain sellers, their portfolio allocation changes indicate they are also getting more positive on cyclical recovery, said Chhaochharia added.