Banking sector tops m-cap rankings

Pushes oil and gas to second and IT to third place.

The banking sector has taken the top position in market capitalisation (m-cap) ranking once again after November 6, 2008, pushing the oil and gas sector to the second place and information technology (IT) to the third. The 43 listed banks collectively added Rs 356,723 crore in m-cap compared to Rs 262,334 crore by the oil and gas sector and Rs 292,070 crore by the information technologies sector.

Banking stocks have witnessed a meteoric rise since the low of March 9, 2009 with the BSE Bankex rising 171 per cent till date. While private sector banks have appreciated 181 per cent, public sector banks rose 151 per cent. Only realty (the BSE Realty Index up 250 per cent) and metal stocks (the BSE Metal Index up 220 per cent) have outperformed the Bankex. The Sensex has appreciated 110 per cent since March 9 lows.

The banking sector is believed to be among the key benefactors to gain from the reviving economy. Earnings visibility of the sector has improved with superior outlook on credit, margins and asset quality of banks. An upward revision in earnings and expansion in valuations multiples are expected to underpin the stock prices further says, banking analyst at Systematix Shares & Stocks.

According to a Citigroup banking sector analyst, Indian banks' earnings for the second quarter are likely to grow 24 per cent with trading gains boosting profits. The loan growth is expected to be modest at 13.2 per cent, while net interest margins will remain low due to re-pricing of loans. Private sector banks are likely to narrow their performance gap with peers in the public sector, but expected to post a 1 per cent decline in operating profits.

The rally also increases share of the banking sector in total market cap to 11.89 per cent from 7.98 per cent on March 9, 2009. However, the financial sector, including term lending institutions and housing finance firms, has a 14.5 per cent share in total market cap of listed companies on the Bombay Stock Exchange. The information technology sector at 10.1 per cent and the refinery sector at 8.75 per cent account for a sizeable chunk of market capitalisation.

The financial sector's, including banks, financial institutions and non-banking financial companies, combined weightage in the Sensex has increased to 23.30 per cent from 19.80 per cent.

Among the Asian emerging markets, the financial sector accounts for over 10 per cent weightage in the benchmark indices. The Hang Seng has a 50.54 per cent weightage for the financial sector. The Jakarta (26.47 per cent), Korea (17.52 per cent) and Taiwan (14.01 per cent) get higher weightage from the financial sector.