Nifty Bank outperforms benchmark in December: A look at outlook going ahead and top picks by analysts

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Geojit Financial Services, commented, "This, along with short covering and reasonable valuations, will keep this segment strong." The Nifty Bank has gained approximately 11 percent in the year-to-date period in 2023 and the last 12 months. In comparison, the benchmark Nifty has rallied 18 percent in the year-to-date period and 17 percent in the last 12 months. Analysts emphasise the importance of the banking index's performance for the overall health of the Indian market.

The continued support of banks is seen as crucial for sustaining record-high levels in the broader market. But will this support continue? Let's take a look at what analysts believe. They also list their top picks in the space for the upcoming year 2024.

A significantly better credit demand, higher repo rates aiding the NIMs, & better asset quality environment keeping the credit costs under control have helped the bottom lines of all banks. Thus the banks with cheap valuations were the most benefitted which were mostly the PSU banks. Going forward now, with speed breakers like deposit pressure, peaking out of NIMs, and normalisation of assets quality environment, the re-rating cycle of cheap stocks seems to be over or near its end.

Now the ones who will keep on performing with stability will be rewarded. We thus prefer top private banks at this stage. We like HDFC Bank, Axis Bank, ICICI Bank & Federal bank.

For the broader banking space, the outlook seems promising, spurred by rising income and government initiatives. Top picks include HDFC, ICICI, and Kotak Mahindra for private players, SBI for public sector giants, and IndusInd, and RBL for mid-sized players. This sector is dynamic, so continuous research and expert guidance are key before diving in.