INSUBCONTINENT EXCLUSIVE:
ET Intelligence Group: The classical pre-poll sectoral rotation by investors to ‘domestic cyclical’ from ‘growth’ stocks has fuelled
the recent rally in banking stocks
This has amplified the price ratio between the Bank Nifty and the NSE Nifty to a record high.
At the current reading of 2.59, compared with
the 15-year average of 1.89, the price ratio is two standard deviations from the mean
Statistical theory suggests that about 95 per cent of all price moves of a security or index are within two standard deviations
The current level, therefore, is a rare phenomenon.
The momentum in banking stocks has helped the Nifty touch a new high, given the 36 per
cent weight these stocks have on the NSE’s benchmark index
HDFC Bank, ICICI Bank, State Bank of India and IndusInd Bank have gained 10-21 per cent since the NSE Nifty hit its recent low in February
Out of the top 10 stocks that pushed the index to a new high, seven are from the banking space and these have contributed 40 per cent of the
index’s last 1,000-point gain.
This is the first time in almost three years when the Nifty’s gain has come primarily due to support from
The NSE Bank index is trading at 2.75 times its book value, the highest since 2010 and against the 15-year average of 2.12.
The Bank Nifty
rose 12.3 per cent since the beginning of the year, while the Nifty gained 8.45 per cent
All constituents of the NSE bank index are trading above the 200-day moving average, while for the Nifty index, 74 per cent of the stocks
