Axis Bank, ICICI Bank, and State Bank of India-some of the Bluechip financial counters-lifted the markets today as analysts turn positive on the sector. That apart, August Futures and Options (F&O) series, which ended on August 27, saw strong participation from the banking sector underlying optimism in the space.
According to global brokerage UBS, the economy is recovering gradually, as suggested by high-frequency data, lowering the risks of bad loan formation. "The recent capital infusion (over US$10bn) in some banks/non-banking financial companies (NBFC) would be an additional cushion. We cut our FY21/FY22 estimates for GNPL formation from 7%/5% to 4%/5% of loans. Bank stocks are down 12-62% YTD and have underperformed the broader markets. We think the sector’s downside risks are limited," they said in a recent report.
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