Banking theme is strong in 2023 but peak growth may have passed

The banking sector has been the cynosure of the markets all through 2022. Most market pundits have been bullish on the banking stocks in recent months and continue to be so for at least the first half of 2023. However, every assent has a peak and Krishnan ASV, Lead Analyst (BFSI) at HDFC Securities believes that that might have been reached.

“When everything seems to be very rosy, we tend to look for red flags. As of now, close of December 2022, it seems we have navigated the period fairly well. From an asset quality perspective, it still remains a very benign cycle but I have a feeling that we might have exited the peak growth, peak margin quarter now,” he explained.

The majority view in the market is however pro banking sector growth for now. Speaking to CNBC-TV18, market veteran Samir Arora of Helios Capital echoed this belief when he was talking about his outlook for the new year.

“I think banking is one of the better sectors not just now but forever. Broadly talking about the private sector – HDFC Bank, Kotak Mahindra Bank, Axis Bank and ICICI Bank have done very well even in long term,” he said.

Krishnan from HDFC Securities, also believes that a deeper look might show the picture tilting in the private banks' favour soon as structurally they have few advantages over the public sector undertaking (PSU) banks. This is because PSU banks have seen a significant amount of rally over the last three months already.

“We believe there could be some reversal there. We remain heavily leaning towards the private sector banks. And our top picks are generally centred on ICICI Bank, Axis Bank, State Bank of India (SBI) and Federal Bank,” he mentioned.

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