Banking and financial services stocks were in the spotlight on Friday with the Nifty Bank scaling the crucial 38,000-level mark for the first time ever. The sectoral index touched a fresh lifetime high of 38,112.75.
At 0959 am, Nifty Bank was up 0.5 percent at 37,869.70.
The Nifty Bank index has risen 21.5 percent Year to Date (YTD), however, had underperformed the benchmark Nifty50 that gained over 27 percent YTD.
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The chart shows that the momentum in the Nifty Bank index is strong and we can see decent buying up to the level of 40,000, said Kkunal Parar, Vice-President of Research at Choice Broking.
The downside support for the index now comes at 37,000, Parar said.
Banking stocks extended gains today after Finance Minister Nirmala Sitharaman on Thursday announced that the Cabinet has cleared the formation of National Asset Reconstruction Company (NARCL) or 'bad bank'.
Banks having high corporate non-performing assets should benefit from the bad bank incorporation including the likes of State Bank of India (SBI), ICICI Bank, Axis Bank, IndusInd Bank, RBL Bank, IDFC First Bank, Karnataka Bank, South Indian Bank and most other public sector banks, said Nirmal Bang Securities.
The government will guarantee up to Rs 30,600 crore for security receipts issued by the NARCL. The NARCL will buy bad loans from banks under a 15:85 structure where it will offer 15 percent of the net asset value in cash and the balance in security receipts.
PhillipCapital believes that the asset reconstruction company structure is a welcome move which will reduce management time and bandwidth towards resolution of stress asset and can be used for business development.
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It sees IDBI Bank as the biggest beneficiary as almost loan worth 12 percent of their loan book can be transferred to NARCL in the first phase.
Nirmal Bang Securities believes speedy clean-up of asset quality shall pave way for accelerated credit growth by banks which are burdened with high non-performing assets.
ICICI Securities also believes that the development will be positive for the banking sector in general and public sector banks in particular.
Credit Suisse continues to like SBI among public sector banks and prefers large private banks like Axis Bank, ICICI Bank and HDFC Bank.
At 0959 am, Nifty Private Bank index was up 0.3 percent at 19,751.90, Nifty Financial Services gained 0.9 percent to 18,512.60. However, Nifty PSU Bank index was down 0.6 percent at 2,525.70.
First Published: IST