A Sectoral Overview: NIFTY Bank

 

NIFTY Bank is the benchmark index of the banking industry in India. It consists of the most liquid and large capitalised Indian banking stocks. Therefore, it is an important tool for investors to optimize the concentration of banking stocks in their equity portfolios.

 

Banks and other financial institutions form an essential component of an investor’s portfolio. In India, most banks are chosen from the pool of banks represented by NIFTY Bank to get exposure to the banking sector. 

 

The banking sector in India consists of both Public Sector and Private Sector banks. A few of these private sector banks, including HDFC Bank, ICICI Bank and Kotak Mahindra Bank, have outperformed the Indian market in the past decade. On the other side, public sector banks have relatively underperformed, at times significantly. 

 

However, a few of the public sector banks, including State Bank of India and Federal Bank, have improved their earnings in recent years and have seen investor interest in the period following the ‘Covid-crash’.

 

This blog explores the 10 constituents of the NIFTY Bank index arranged in order of their composition in the index. The calculation of the same is done using the free-float market capitalization method. Only the stocks that are openly available in the market for day to day trading are considered.

 

(Must read: A Sectoral Overview: NIFTY Metal)

 

 

Constituents of NIFTY Bank:

 

Please note: All the data used below is used as of 20th June 2021; the website used for data is www.screener.in, and the website used for charts is www.tradingview.com. All the bank-specific data, including the number of branches, ATMs, etc., is taken from in.finance.yahoo.com.

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NIFTY Bank’s Constituents

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1. HDFC Bank Ltd (29.29%): 

 

Current Price: Rs. 1,498

52 week High/ Low: Rs. 1,650/993

Market Cap: Rs. 828,095 Cr

P/E: 26.0

ROE: 23.6%

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HDFC Bank Ltd Past Price Movement

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HDFC Bank Limited provides various banking and financial services to individuals and businesses in India, Bahrain, Hong Kong, and Dubai. It operates in Treasury, Retail Banking, Wholesale Banking, Other Banking Business, and Unallocated segments.

 

As of March 31, 2021, it had 5,608 branches and 16,087 ATMs in 2,902 cities/towns. HDFC Bank Limited was incorporated in 1994 and is based in Mumbai, India.

 

2. ICICI Bank Ltd (21.37%): 

 

Current Price: Rs. 631

52 week High/ Low: Rs. 679/334

Market Cap: Rs. 436,827 Cr

P/E: 23.8

ROE: 15.0%

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ICICI Bank Ltd Past Price Movement

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ICICI Bank Limited provides various banking products and financial services in India and internationally. It operates in Retail Banking, Wholesale Banking, Treasury, and Others Banking segments. 

 

As of March 31, 2020, it had a network of 5,324 branches, 15,688 ATMs, 483,538 POS terminals, and 1,791 cash acceptance machines. ICICI Bank Limited was founded in 1955 and is headquartered in Mumbai, India.

 

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3. Kotak Mahindra Bank Ltd (12.36%)

 

Current Price: Rs. 1,706

52 week High/ Low: Rs. 2,049/1,231

Market Cap: Rs. 338,225

P/E: 33.9

ROE: 14.9%

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Kotak Mahindra Bank Ltd Past Price Movement

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Kotak Mahindra Bank Limited provides banking and financial services to corporate and individual customers in India. It operates through Treasury, BMU, and Corporate Centre; Retail Banking; Corporate/Wholesale Banking; Vehicle Financing; Other Lending Activities; Broking; Advisory and Transactional Services; Asset Management; and Insurance segments. 

 

As of March 31, 2020, it had a network of 1,600 branches and 2,519 ATMs; and branches in GIFT City and DIFC, Dubai. Kotak Mahindra Bank Limited was founded in 1985 and is based in Mumbai, India.

 

(Related blog: A sectoral overview: NIFTY IT)

 

4. State Bank of India (12.21%):

 

Current Price: Rs. 419

52 week High/ Low: Rs. 442/176

Market Cap: Rs. 374,120 Cr

P/E: 17.3

ROE: 8.21%

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State Bank of India Past Price Movement

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State Bank of India provides various banking products and services to individuals, commercial enterprises, corporates, public bodies, and institutional customers in India and internationally. The company operates through Treasury, Corporate/Wholesale Banking, Retail Banking, Insurance Business, and Other Banking Business segments.

 

As of March 31, 2021, it operated 22,219 branches and 62,617 ATMs. The company was founded in 1806 and is headquartered in Mumbai, India.

 

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5. Axis Bank Ltd (12.15%): 

 

Current Price: Rs. 748

52 week High/ Low: Rs. 800/400

Market Cap: Rs. 229,326 Cr

P/E: 31.9

ROE: 8.33%

 

Axis Bank Ltd Past Price Movement

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Axis Bank Limited provides corporate and retail banking products and services in India and internationally. 

 

Axis Bank Limited operates approximately 4,528 domestic branches with 12,044 ATMs and 5,433 cash recyclers; 11 overseas offices with units at Singapore, Hong Kong, Dubai, Colombo, Shanghai, and Gift City-IBU; and representative offices at Dhaka, Dubai, Abu Dhabi, and Sharjah. The company was formerly known as UTI Bank Limited and changed its name to Axis Bank Limited in July 2007. Axis Bank Limited was incorporated in 1993 and is based in Mumbai, India.

 

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6. IndusInd Bank Ltd (5.05%): 

 

Current Price: Rs. 1,016

52 week High/ Low: Rs. 1,120/472

Market Cap: Rs. 78,719 Cr

P/E: 26.9

ROE: 8.60%

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Indusind Bank Ltd Past Price Movement

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IndusInd Bank Limited provides various banking products and services to individuals, NRIs, business owners, corporates, and government and financial institutions. It operates through Treasury Operations, Corporate/Wholesale Banking, Retail Banking, and Other Banking Business segments.

 

As of December 31, 2020, the company had 1,915 branches and 2,835 ATMs in India and representative offices in London, Dubai, and Abu Dhabi. IndusInd Bank Limited was founded in 1994 and is based in Mumbai, India.

 

(Similar read: A sectoral overview: NIFTY Pharma)

 

7. AU Small Finance Bank Ltd (1.85%):

 

Current Price: Rs. 1,036

52 week High/ Low: Rs. 1,356/517

Market Cap: Rs. 32,458 Cr

P/E: 27.7

ROE: 27.1%

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AU Small Finance Bank Ltd Past Price Movement

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AU Small Finance Bank Limited provides various banking and financial services in India. It operates through Treasury, Retail Banking, Wholesale Banking, and Other Banking Operations segments.

 

As of March 31, 2020, it operated 406 bank branches, 122 banking outlets, 88 business correspondents, 31 asset centres, 13 offices, and 356 ATMs. The company was formerly known as AU Financiers (India) Limited and changed its name to AU Small Finance Bank Limited in May 2017. AU Small Finance Bank Limited was founded in 1996 and is headquartered in Jaipur, India.

 

8. Bandhan Bank Ltd (1.84%):

 

Current Price: Rs. 330

52 week High/ Low: Rs. 431/251

Market Cap: Rs. 53,208 Cr

P/E: 24.1

ROE: 14.5%

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Bandhan Bank Ltd Past Price Movement

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Bandhan Bank Limited provides commercial banking services in India. It operates through Treasury, Retail Banking, Corporate/Wholesale Banking, and Other Banking Business segments.

 

As of March 31, 2020, it operated 1,018 branches, 3,346 banking units, 195 home loan centres, and 485 ATMs. The company was founded in 2015 and is headquartered in Kolkata, India. Bandhan Bank Limited is a subsidiary of Bandhan Financial Holdings Limited.

 

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9. Federal Bank Ltd (1.54%):

 

Current Price: Rs. 87.1

52 week High/ Low: Rs. 92.5/45.4

Market Cap: Rs. 17,388 Cr

P/E: 10.5

ROE: 10.6 %

 

Federal Bank Ltd Past Price Movement

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The Federal Bank Limited provides a range of banking and financial services in India. It operates through four segments: Treasury, Corporate/Wholesale Banking, Retail Banking, and Other Banking Operations.

 

The company was formerly known as Travancore Federal Bank Limited and changed its name to The Federal Bank Limited in March 1947. The Federal Bank Limited was incorporated in 1931 and is headquartered in Aluva, India.

 

10. IDFC First Bank Ltd (1.38%):

 

Current Price: Rs. 54.2

52 week High/ Low: Rs. 69.3/24.1

Market Cap: Rs. 33,641 Cr

P/E: 74.4

ROE: 2.95 %

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IDFC First Bank Ltd Past Price Movement

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IDFC First Bank Limited provides various banking and financial products and services to corporates, individuals, multinational companies, SMEs/entrepreneurs, financial institutions, and the government in India. It operates through four segments: Treasury, Corporate and Wholesale Banking, Retail Banking, and Other Banking Business. 

 

As of May 27, 2020, it operated 464 branches and 356 ATMs across 20 states and 66 districts. The company was formerly known as IDFC Bank Limited and changed its name to IDFC First Bank Limited in January 2019. The company was incorporated in 2014 and is based in Mumbai, India.

 

 

Final Note

 

The financial services sector is the most crucial sector for the financial well-being and, essentially, the economic well-being of a country. The financial services sector is the highest contributor (38.6%) of the NIFTY 50 index, the headline index of the Indian stock markets. A similar case is visible worldwide. 

 

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HDFC Bank in itself contributes 9.79% of NIFTY 50. ICICI Bank contributed 6.8%, Kotak Mahindra Bank contributes 3.93%, Axis Bank contributes 2.8%, State Bank of India (SBI) contributes 3.42%, and Indusind Bank contributes 0.85%. To put things into perspective, the IT sector contributes 16.16%, the Metals sector contributes 3.63% and Pharma 3.54%.

 

Moreover, the National Stock Exchange of India is the largest derivatives exchange globally, and most of the derivative trading in NSE is done on the NIFTY 50 and NIFTY Bank indexes. Such is the significance of the NIFTY Bank index.

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IDFC First Bank Ltd Past Price Movement

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Overall, both the NIFTY 50 index and the Bank NIFTY index have seen a secular uptrend in the past decade. Bank NIFTY has maintained its stance above the 100-day simple moving average. The only time it retracted to this moving average was during the ‘Covid-crash’ in March last year. It quickly recovered the same, providing a fantastic approximate 15,000 points rally from the 20,000 to 35,000 levels in the following 12 months.

 

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All in all, the banking sector in India is a significant chunk of investment opportunities in India. Almost all the investors investing in the Indian markets closely monitor the NIFTY Bank index to gauge their exposure to the banking sector and gauge their exposure to the whole market. If the banking sector does not perform well, it is tough for the entire market to perform well, as can be seen by the movement of the markets in the past few months.