Bank stocks touch a lifetime high

Even as the markets hit a fresh high, banking stocks are buzzing on the bourses. The BSE Bankex hit its all-time high on Monday with several stocks in the index closing at their 52-week highs. The index has surged by a whopping 78% since hitting its 52-week low on February 4 this year. 

HDFC Bank, Bank of Baroda and ING Vysya Bank stocks hit their life-time highs on Monday. While the HDFC Bank scrip soared to a high of Rs. 940, the Bank of Baroda (BOB) stock touched a fresh peak of Rs. 1,059.9. The BOB stock has more than doubled since hitting its yearly low in February Stock Market Trading Tips

State Bank of India (SBI) and DCB Bank scrips jumped to their 52-week highs intra-day on Monday. The SBI stock, which went up 5.4% during the day, has more than doubled from the 52-week low of Rs. 1,455.95 touched on February 14. The DCB Bank scrip too has more than doubled in the last one year. 

SBI was the top gainer among blue-chips on both the Sensex and Nifty after it reported a 31% increase in net profit at Rs. 3,100 crore in July-September following healthy growth in fee income and lower operating expenditure. The SBI counter witnessed heavy trading with nearly 7.25 lakh shares changing hands and the turnover touching Rs. 209.7 crore, the highest on BSE, during the day Financial Astrology Trading Tips

"Lower interest rates improve sentiments as far as NPAs (non-performing assets) are concerned," says Vikram Dhawan, director, Equentis Capital. "The hope of (interest) rate cut is driving the market. Banking stocks have benefited from the improving macro-economic conditions," says Kishor P Ostwal, MD, CNI Research, an equities research provider. 

The Bankex has zoomed by 54.7% so far in the current year ranking only behind the small-cap index in the performance chart on hopes that an economic revival would herald a change in fortunes for the sector Nifty Trading Tips

The banking sector has been saddled with high NPAs and low credit growth due to the economic slowdown. But with the macro-economic conditions improving and inflation easing prompting expectations of a cut in interest rates, banking stocks have started gaining traction. 

Mutual funds (MFs) have invested a whopping Rs. 6,2718.7 crore in banking stocks at the end of October, the highest since market regulator SEBI started releasing sector-wise exposure of fund houses in August 2009 Jackpot Trading Tips 

But market observers advise caution as there are no strong indications of a turnaround. "The capex (capital expenditure) cycle hasn't turned around. The results during the (July) September quarter did not allude to a strong recovery," Dhawan says. "Unless the capex cycle picks up, the NPA situation would not change significantly," he says Intraday Trading Tips