Heavyweight sectors like banks, that have been trailing behind for some time, have room for incremental money coming in and could lead the next leg of the market rally, according to Arvind Sanger, Managing Partner at Geosphere Capital Management.
This optimism towards banks comes at a time when the US Federal Reserve has decided to keep its key interest rate unchanged for a third consecutive time. This move indicates a potential shift in the Fed's approach after a series of rapid rate increases to combat high inflation.
Sanger highlighted the Fed's more dovish outlook, stating, "Fed clearly did signal, much more dovish outlook, and their view is that inflation is coming down so fast, that they need to start cutting in advance."
After lagging for a long period, the Nifty Bank Index has played catch-up with the benchmark Nifty 50, gaining close to 24% year-to-date (YTD) versus Nifty gains of around 26%.
Nitin Aggarwal, Senior Group VP and Head of BFSI at Motilal Oswal Financial Services concurs with Sanger's views. He recently told CNBC-TV18 that the future looks bright for banks. Aggarwal's top picks among the banks include ICICI Bank, IndusInd Bank, State Bank of India (SBI), and Axis Bank.
"....looking at how the earnings growth is likely to pan out, and with some positivity that is now emerging even on a corporate loan demand, we think that the sector will likely maintain the earnings momentum," he told CNBC-TV18.
Madhusudan Kela of MK Ventures also believes the banking sectors looks compelling on a risk-reward basis as these stocks have not participated meaningfully in the last 12-18 months. He prefers public sector banks over private banks, but bets on some private sector banks that have consolidated.
For full interview, watch accompanying video
Also Read | 3 of 4 households in India have ITC products, analysts expect FMCG focus to drive growth
(Edited by : Shweta Mungre)
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