Nifty seen at 17700 by Dec-end: Buy ICICI Bank, SBI, other financial shares to gain from this rally

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September 02, 2021 2:33 PM

NSE Nifty 50 index is set to hit 17,700 levels by December 2021, as range bound volatility suggests the continuance of a strong bull run, said Axis Securities

ICICI Bank, SBI, Nifty, stocks to buyIn over six months, the Nifty 50 index has rallied over 12 per cent, and the market positioning has slowly shifted towards defensive and selective cyclical plays. Image: Reuters

NSE Nifty 50 index is set to hit 17,700 levels by December 2021, as range bound volatility suggests the continuance of a strong bull run, said Axis Securities. The brokerage firm has upgraded its Nifty 50 December target from 17,400 earlier. In August 2021, India VIX, the volatility index, traded around the level of 13, which is lower than the long-term average of 22, suggesting a positive setup for the market with limited downside. Axis Securities believes that if VIX continues to fall, it will trigger a further rally in the broader market. Since November 2020, midcap and smallcap stocks have been picking up steam, and are expected to post robust returns in 2021 as the economic uncertainties and volatility decline.

In over six months, the Nifty 50 index has rallied over 12 per cent, and the market positioning has slowly shifted towards defensive and selective cyclical plays that have outperformed the sensitive sectors play since February 2021. As Nifty 50 is heading towards 17,700, implying a rally of 500 points from the current levels, Axis Securities has suggested buying a few financial stocks which may deliver up to 30 per cent returns. The brokerage firm continues to remain optimistic on the market, and believes that focus on earnings sustenance will be a key, moving forward.

Top 4 financial stocks to buy

ICICI Bank
Buy, CMP: Rs 719.20, Target: Rs 810, Upside: 13%

Axis Securities sees a 13 per cent rally in ICICI Bank stock. It believes that higher loan growth, improving operating profits, and a strong provision buffer coupled with a strong deposit franchise will help ROAE/ROAA expansion over FY22-23E. While the key risks include a significant deterioration in retail asset quality, and delay in the resolution of stressed assets.

State Bank of India (SBI)
Buy, CMP: Rs 430.90, Target: Rs 555, Upside: 28.8%

It will take SBI stock to jump nearly 30 per cent from the current levels to hit the target price pegged by the brokerage firm. It believes SBI to be the best play among PSU banks on the gradual recovery in the Indian economy given its healthy PCR, robust capitalization, a strong liability franchise, and an improved asset quality outlook. “We believe credit costs normalization and improved operational performance will lead to double-digit ROEs of 13-15% by FY22-23E,” Axis Securities said.

Federal Bank
Buy, CMP: Rs 82.40, Target: Rs 100, Upside: 21.4%

Federal Bank is cautiously building a loan mix toward high-rated corporate and retail loans. Key positives are increasing retail focus, strong fee income, adequate capitalization, and prudent provisioning. Key risks include asset quality trends in coming quarters, and loan growth outlook.

Equitas Small Finance Bank
Buy, CMP: 62.65, Target: Rs 76, Upside: 21.3%

The brokerage firm believes Equitas Small Finance Bank is eligible for re-rating given its improving profitability, asset quality as well as return ratios. Recently, the bank has approved the scheme of amalgamation (reverse merger) with the promoter (Equitas Holdings), which would ensure compliance with the regulatory requirements.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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