Banking sector m-cap seen emerging as most valuable

The market share of banking sector to total m-cap increased to 12.1% from 11.1% as of end-December 2013

The banking sector is set to emerge as the most valuable in terms of market capitalization (m-cap) following a sharp rally in bank stocks.

The combined m-cap of thirteen listed banks stood at Rs 1,163,144 crore,  slightly lower than the m-cap of software companies. About 131 information technology (IT) companies have a total m-cap of Rs 1,167,545 crore as of November 3, 2014.

The m-cap of the IT sector was Rs 987,795 crore, while that of the banking sector stood at Rs 769,194 crore at the start of the current calendar year.

The market share of banking sector to the total m-cap of listed companies increased to 12.1% from 11.1% during the year. Meanwhile, the market shares of the software declined to 12.2% from 14.2%.

Banks which are a proxy to the economy have witnessed buying interest from investors after global rating agency Standard & Poor’s (S&P) upgraded  India’s credit outlook to ‘stable’ from ‘negative’.

Further, moderation in consumer price inflation during September 2014 also fuelled rally in bank shares.

In past one month the Bank Nifty, National Stock Exchange's banking share index, which closed at a new high of 17,134 on Monday, rallied 11.87% against 1.4% decline in the CNX IT index and 4.8% rise in the benchmark CNX Nifty.

In calendar year 2014 so far, the Bank Nifty has zoomed 50%, from 11,385 on December 31; compared to 19% rise in CNX IT. In the same period, the Nifty has risen 32%.

Currently, nine banks having market capitalization of more than Rs 25,000 crore against six at the beginning of the current calendar year.

Two banks – HDFC Bank (Rs 2.2 lakh crore) and State Bank of India (Rs 2.03 lakh crore) have m-cap over Rs 2 lakh. ICICI Bank (Rs 1.90 lakh crore) and Axis Bank (Rs 1.05 lakh crore) have m-cap more than Rs 1-lakh-crore each.

Among individual stocks, while HDFC Bank, ICICI Bank, Kotak Mahindra Bank, IndusInd Bank, YES Bank and Axis Bank have hit their respective record highs on the NSE. Of these, YES Bank, Axis Bank and IndusInd Bank surged 70-114% so far in 2014.

The Moody's report on October 30, welcomed some recent measures announced by the government and the Reserve Bank of India to facilitate economic growth, boost the efficiency of the banking system, and attract long-term investment.

"If implemented, these initiatives will enhance the sovereign's credit profile, as they will support sustained GDP growth at higher levels, mitigate fiscal, financial and balance of payments risks, and demonstrate increased institutional capacity", the rating firm said in a report.

	As on Nov 3, 2014		Returns in %
Name	M-cap Rs cr	Price in Rs	1 mth	YTD
HDFC Bank	219,870	911	4.92	36.77
SBI	203,325	2,723	12.38	54.17
ICICI Bank	190,472	1,646	15.18	49.78
Axis Bank	105,086	445	17.19	71.32
Kotak Mahindra Bank	85,658	1,110	9.77	52.48
TCS	507,372	2,590	-6.67	19.26
Infosys	234,629	4,086	6.20	17.22
Wipro	139,420	565	-8.26	1.02
HCL Technologies	110,192	1,571	-9.73	24.41
Tech Mahindra	60,772	2,580	2.36	40.40
Bank Nifty	1,163,144	17,134.10	11.9	50.5
CNX IT	1,167,545	11,359.90	-1.39	19.4
Data compiled by BS Research
Source : CapitalinePlus