Nifty@21,000: What is the best investment opportunity?
Nifty Bank.
Bank Nifty has grappled with underperformance in the past 5 years compared to the benchmark Nifty50. The banking index recorded a growth of 78%, notably trailing behind Nifty50, which witnessed a 96% surge during the same period.
This performance gap has sparked curiosity among market enthusiasts, prompting a pivotal question: Can Bank Nifty reverse the trend and outperform the benchmark?
History implies that it has a good chance of beating the benchmark.
The price-to-book ratio of Bank Nifty has dipped lower to 2.72 levels, closely aligning with its 5-year average of 2.69x. This signals attractive valuations for the entire index.
Furthermore, the decadal-low Foreign Portfolio Investors' (FPI) equity holdings are bound to make a comeback sooner than later.
This suggests that darlings of FPI aka Banking and Financial Services may witness inflow of hot money due to their reasonable valuations.
The chart below reveals the spread of 4-year rolling returns of Bank Nifty over Nifty50.
It is hovering around its lowest level since the global financial crisis. This suggests a potential bottoming out of the underperformance.
We have also observed that the last calendar quarter of the year is strongest for Bank Nifty.
Here are the returns that Bank Nifty has generated from October to December for the last 10 years.
