For the Indian equities, year 2020 has been an unprecedented one. After a steep correction to the tune of 40%, the NSE index Nifty 50 witnessed V-shaped recovery amid positive global news flow. The year 2020 began with investors' optimism around asset quality and growth, which faded as Covid 19 pandemic led to undue panic and fear, and as the year drew to a close such concerns started to drive away.
Nifty, Nifty Bank After March Lows Are Up By Up To 80%
From the lows of 7,610 levels struck in March this year, Nifty is up 78 percent. And similar trend has been mirrored by stocks in the financial pack. Between January and March, Nifty Bank slumped by as much as 48% on account of nationwide lockdown but has recovered since then by 80%.
Besides some large private lenders as well as NBFCs/HFCs having resilient business models including strong customer base, underwriting, distribution and collection are trading close to their pre-Covid price levels or have surpassed them.
HDFC twins, Kotak Mahindra, ICICI Bank, Bajaj twins and Cholamandalam Finance led the recovery in financial pack
Rajiv Mehta, Lead Analyst - Institutional Equities, Yes Securities is of the view that "The likes of HDFC Bank, Kotak Mahindra Bank, ICICI Bank, HDFC, Bajaj twins and Cholamandalam Finance have led the recovery in financial sector stocks. The second rung banks and NBFCs/HFCs are still trading significantly below their pre-Covid prices with lingering uncertainty on asset quality outcomes Sustained economic recovery, improving income scenario for salaried and business class, instrumental liquidity interventions by RBI and Government, and a low interest rate represents a conducive business backdrop for lenders".
Rally and Recovery In Stock Prices In Financial Bucket To Extend To 2021
The analyst at Yes Securities suggests that the rally and recovery in stock prices must extend to 2021. Nonetheless, the first half of CY 2021 shall likely be dominated by the above-specified strong lenders and then mid and small cap financial stocks will post a sharp catch-up, demonstrating asset quality resilience to Covid pandemic.
Top Yes Securities' Picks From Banking And Financial Space for 2021
In our coverage, Mehta said there is a belief that HDFC Bank, ICICI Bank, RBL Bank, Mahindra Finance, Repco Home and Spandana can emerge as strong performers of 2021.