â,¹30,600-govt guarantee for bad bank: How bank shares will behave going forward, which stocks should take leadership to provide strength to market? Anil Singhvi decodes

The recent rally in the baking shares was much awaited as it has been an underperformer for months now as compare to Nifty Index, said Zee Business Managing Editor and Market Guru Anil Singhvi on Friday. He said this surge in banking stocks is also aided by the government’s bad bank announced on Thursday.

Singhvi mentioned that the banking shares haven’t moved much in the last seven months, when both the indices Nifty and Nifty Bank had touched new high. Nifty kept gaining, however, Nifty Bank continued its tepid pace.

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He pointed out besides banking even auto sector has been mute so far and trying to get some room to surge. "The auto index has registered 5 per cent negative performance as compared to Nifty Index in the last seven months, while Nifty Bank has turned flat mostly after recent strengthening," he said

The market guru indeed sees the buzz in the Nifty Bank as an improvement, however, he is skeptical about its consistency and the chance of it being outperforming Nifty Index. 

The government’s bad bank announcement on Tuesday will mostly help state-owned banks and Nifty Bank as an Index has very few public sector unit (PSU) banks in its kitty, Singhvi added.

Moreover, he explained even if this PSU banks such as SBI and Bank of Baroda from the Nifty Bank list grow 5 per cent plus-minus, it doesn’t create much impact to the market as majority of them lack weightage and strength. 

The managing editor says, we would need private lenders such as ICICI Bank and HDFC Bank to be market movers and create a mood within the market.

On a positive side, Singhvi believes, Nifty Bank's leadership is yet to come, however, the valuations in the banking stock are good amid the gap between Nifty and Nifty Bank. He says it obvious that Nifty is soaring and bank Nifty crawling behind the value is visible.

Moreover, at some extent, even the bad bank announcement would have also acted as trigger to the whole banking segment.

Singhvi believes before concluding that the banks’ balance sheet would improve, their capital requirement would reduce, while the NPA level will be also be decreased eventually, which he says market is liking it, as PSU bank index on Thursday surged over 5 per cent.