The recent rally in the stock market may be nearing its end, according to experts. They cite several short and medium-term risks, including potential global economic recession, signs of slowdown across sectors in India, and stretched valuations. The banking sector may no longer be attractive, as interest rates have peaked, while the IT sector is facing headwinds from the global economic fallout. Additionally, the consumption side of the economy is looking cloudy, with lower discretionary spending and inventory pile-ups. A 5-6% correction is needed to clear the froth, and investors are advised to be cautious in the short term.
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Bank of Baroda briefly hit a market capitalisation of INR1tn ($13.3bn) on 17 May, becoming the second Indian state-backed bank to do so, after rising almost 4%intraday. State Bank of India was the first to reach the milestone and is uninferred, with a market cap of INR5.08tn. Meanwhile, other Indian public banks have also made strong gains this year and the Nifty PSU Bank index is up 65% in the past year, outperforming the Nifty Private Bank index, which has only gained 33% in the same period.
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FY23 was the best ever for Indian public sector banks, posting impressive earnings and stock performance, with the banking sector gaining favour for adapting to the digital age, according to market expert Swapnil Shah. The strong gains have seen the Nifty PSU Bank index rise by 65% over the last year, outperforming the Nifty Private Bank index. The public sector banks have a lot of potential for a further upside, with many analysts suggesting Bank of Baroda and State Bank of India as stock picks for FY24. Multibaggers include State Bank of India, Punjab & Sind Bank, and Bank of Maharashtra.
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