The banking sector forms the backbone of the Indian economy as it facilitates credit delivery and stimulates growth and investment. Indian banking has been undergoing a transformation with the rollout of innovative, tech-driven business models.
The government has also been making concerted efforts to clean up stressed balance sheets of PSBs. With a continued push for infrastructure investment and the ‘Make in India’ scheme, the demand for credit is set to rise. This will augur well for the banking companies.
The Nifty Bank index is up over 11% so far this year versus only a 1.56% rise in the benchmark Nifty. This trend is expected to continue, and so, we are listing a few bank shares that you can invest in to reap gainful returns.
List of Best Banking Stocks in India
- HDFC Bank
- ICICI Bank
- Bank of Baroda
- IndusInd Bank
Overview of Financial Sector Stocks
|Company||CMP (Rs.)||Market Cap (Rs. crs.)|
|Bank of Baroda||141.60||73,226|
As of 20/09/2022
Headquartered in the city of Mumbai, the State Bank of India (SBI) is an Indian public sector banking and financial services statutory body. It also features on Forbes’ Fortune 500 companies list. SBI services over 46.77 crore customers through its 22,266 branches. Its services include personal banking, SME banking, rural banking, corporate banking, government banking, and international banking.
The SBI share price hit a new 52-week high of Rs. 578.50 last week. Resultantly, SBI has become the 3rd Indian bank to have surpassed Rs. 5 trillion market cap value. The SBI share price has surged almost 24% YTD and 31% in the last year.
Interested in investing in SBI? Check out the latest share price of SBI on Angel One!
Originally promoted in 1994 by ICICI Ltd., ICICI Bank is the 2nd largest Indian private sector bank. It has been designated as a Domestic Systemically Important Bank (D-SIB) along with SBI and HDFC Bank. The bank serves its customers through 5,418 branches, 51% in rural areas.
The 5-year CAGR return for ICICI bank is 25.6%, and it has delivered a better CASA ratio as compared to HDFC Bank. ICICI Bank’s loan book has been veering towards the retail segment—mostly secured lending.
The ICICI Bank share price has risen by more than 29% over the past year versus only a 4% rise in NIFTY50. Indeed, ICICI shares have been hitting new highs this week on BSE, reaching Rs. 936.65, a new 52-week high price. ICICI’s share price has earned over 24% YTD and 119% in the last 3-year period.
Check out the latest share price of ICICI Bank on Angel One before investing!
Incorporated in 1994, the Housing Development Finance Corporation Limited (HDFC), received an ‘in principle’ approval from the RBI to set up a private sector bank during the LPG regime. It has a banking network of 6,378 branches and 18,620 ATMs in 3,203 cities. HDFC Bank primarily provides services in retail banking, wholesale banking, and treasury operations.
HDFC bank has been posting robust performance during multiple credit cycles and has stringent underwriting standards in place. Furthermore, the HDFC merger will be value accretive for the bank. The HDFC share price has surged over 15% in the past 3-month period.
Check out the latest share price of HDFC Bank on Angel One!
Bank of Baroda (BOB)
Established in 1908, the Bank of Baroda is India’s 2nd largest public sector bank. It provides various financial services, including personal banking, corporate banking, international banking, SME banking, rural banking, NRI services, and treasury operations.
Bank of Baroda has changed tact by switching its focus from corporate loans to financing small and mid-cap companies seeking credit up to Rs. 100 crores. It has been digitising its operations and is in a position to efficiently compete with NBFCs that dominate this segment.
The Bank of Baroda share price has been on a roll, surging over 17% this month. BOB shares have accelerated 73% YTD and have generated returns to the tune of 81% in the past year. Such momentum is expected to last with the CapEx cycle turning up again.
Check out the share price of Bank of Baroda on Angel One!
Inaugurated in 1994, IndusInd Bank is a publicly held Indian financial services company headquartered in Mumbai. The Bank offers a wide range of banking products to corporate and retail clients and undertakes treasury operations.
The IndusInd Bank share price reached a new 52-week high of Rs. 1250.05 on September 16th, surging over 4%. This was fuelled by the news of the reappointment of Sumant Kathpalia as the MD and CEO of the bank. IndusInd Bank shares have soared 42% YTD, hitting another new 52-week high on September 20th of Rs. 1275.80.
This price rally is expected to last on account of credit growth revival in MFI (microfinance institutions) and vehicle finance segments.
Check out the latest share price of IndusInd Bank on Angel One before investing!
Factors to be Considered Before Investing in Banking Stocks
The key metrics for evaluating a banking stock include net interest margins (NIMs), credit to deposit ratio (CDR), and capital adequacy ratio. These ratios need to be high to indicate strong company fundamentals. Additionally, you should compare bank stocks on their ROA and ROE ratios.
The banking sector stocks can be highly volatile as their prospects are heavily dependent on macro events and growth cycles. Invest in banking companies only if their risk is aligned with your risk appetite.
Rate of Interest
The state of the economy determines whether the policy rates will be changed or maintained. This decision impacts the profitability of banks as high-interest rates may result in lower demand for loans.
Indian banking stocks have been bucking the global trend and are showing no signs of a slowdown, despite a global economic slowdown looking imminent. These stocks are expected to benefit from accelerating credit demand and improved asset quality. However, one needs to be careful about not getting caught up in the euphoria and extensively research these stocks before investing. Don’t forget to open your Demat account with Angel One before investing!
Disclaimer: This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory.