HDFC Bank, ICICI Bank shares lift Nifty Bank to new highs; what's next?

Lifted by a slew of strong performance from the domestic banking sector, Nifty Bank index, the gauge of banking stocks in India, hit its 52-week high on Monday, rising nearly 2 per cent for the day. Led by upbeat performance of ICICI Bank and HDFC Bank, all other eight constituents of Nifty Bank index were trading in green.

Against the previous close at 54,290.20 on Thursday, Nifty Bank index surged 1.70 per cent to hit 55,212.90-mark during the session. Leading private sector lender HDFC Bank gained over 2.25 per cent to Rs 1,950 on Monday, while ICICI Bank surged more than 2.15 per cent to hit Rs 1,437.

The market participants were expecting the large private banks to take the lead, surging to new all-time highs. The Q4 results were aligned with market expectations. The results of HDFC Bank and ICICI Bank have the potential to take Bank Nifty to all-time high, said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

Bank Nifty charts indicate potential support at 54,000, followed by 53,700 and 53,500. If the index moves higher, resistance could emerge at 54,500, with subsequent levels at 54,700 and 55,000, said Mandar Bhojane, Research Analyst at Choice Broking

The Bank Nifty index decisively crossed the key trend line resistance zone and formed a big bullish candle on both daily and weekly charts, reflecting underlying strength, said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C Mehta Investment Interrmediates. "Traders are advised to adopt a buy on dips strategy," he said.

Besides the leading two private lenders, AU Small Finance Bank and IDFC First Bank surged 4.33 per cent to Rs 612 and 4.09 per cent to Rs 65.58 respectively on Monday. IndusInd Bank, State Bank of India and Axis Bank gained 3 per cent each. Canara Bank, Federal Bank, Punjab National Bank, Bank of Baroda and Kotak Mahindra Bank also rose 1-2 per cent each in the early trade.

Commenting on state-run lenders, Aditya Gaggar, Director of Progressive Shares said that the PSU banking sector has ended its corrective move with an inverted head and shoulder pattern breakout. He is positive on Canara Bank, State Bank of India and Indian Bank.

ICICI Bank's total market capitalization hit Rs 10 lakh crore for the first time, while HDFC Bank was just shy away from Rs 15 lakh crore-valuation in the early days. Both the private lenders, which have more than 53 per cent weightage on Nifty Bank index, hit their respective 52-week highs during the session. Both lenders reported their quarterly earnings this Saturday.

HDFC Bank's net profit grew 6.7 per cent YoY to Rs 17,6161 crore in the March 2024 quarter, while its net interest income rose 10.3 per cent YoY to Rs 32,066 crore. The leading private lender's gross NPA declined to 1.33 per cent for the quarter. The lender also announced a final dividend of Rs 22 per share.

ICICI Bank reported a 18 per cent YoY jump in its net profit at Rs 12,630 crore in the Q4FY25, while NIIs rose 11 per cent YoY to Rs 21,193 crore with NIMs expanded to 4.41 per cent. The private lender's gross NPAs declined to 1.67 per cent, while the board announced a dividend of 11 per share.

JM Financial finds ICICI Bank's Q4 results as a strong all-round show. The brokerage has a 'buy' rating on it with a target price of Rs 1,650. ICICI Bank’s earnings beat estimates, largely driven by lower-than-expected credit costs and strong margin performance, partly offset by softer loan growth, said HDFC Securities with a 'buy' rating target price of Rs 1,540.

Nuvama believes that positive outcomes on asset quality, gain in deposit market share, improving LDR and uptick in core NIM, Q4FY25 was strong for HDFC Bank. It has a 'buy' rating on the stock with a target price of Rs 2,195. Motilal Oswal sees this a steady quarter for HDFC Bank with growth trajectory set to accelerate. It has a target price of Rs 2,200 with a 'buy' tag.

Another private lender, YES Bank, which is not part of Nifty Bank, soared 7 per cent following its Q4 results on Saturday, YES Bank reported a better-than-expected 63 per cent YoY rise in net profit Rs 738 crore in Q4FY25, while its net interest income rose 5.7 per cent YoY to Rs 2,276 crore. The private lender's provisions and contingencies fell 32.5 per cent YoY to Rs 318 crore.

ICICI Securities has upgraded YES Bank to 'reduce' from a 'sell' rating. YES Bank's reported Q4FY25 PAT was a 5 per cent beat, led by NIM uptick, seasonal rise in fee and contained opex and improved asset quality, it said. However, ICICI Securities' target of Rs 16 per share, suggests a 17 per cent downside in the stock.