There has been strong demand for banking and financial stocks due to pick-up in economic activity, favorable earnings outlook, better macro conditions, improving asset quality, reduction in SMAs/restructured loans and strong loan growth.
Best BFSI Stocks to Buy: Talking about the financial year 2022, so far the returns in NSE Finance and Bank Nifty have been weak compared to Nifty. But some banking and financial stocks outperformed during this period. On the other hand, if we talk about the last 2 to 3 months, Bank Nifty has outperformed. Banking and financial stocks have been in good demand due to economic activity, favorable earnings outlook, better macro conditions, improving asset quality, reduction in SMAs/restructured loans and strong loan growth. Brokerage house Motilal Oswal says that the outlook for BFSI is strong. Some stocks are ready to outperform. These include banks, NBFCs, life insurance and non-lending financial companies.
FY22: Best Performing Banking and Financial Stocks
Best performing stocks so far in FY 2022: ICICI Securities 89%, Bajaj Finserv 62%, CBK 54%, BoB 43%, SBI 38%, Bajaj Finance 32%, ICICI Bank 29%, Federal Bank 27%, IIFL Wealth Management 24% and SBI LIFE 24%.
How is the outlook of the sector
According to brokerage house Motilal Oswal, the outlook of the BFSI sector is very strong. This sector will continue to grow on the back of loan growth and strong asset quality. According to the report, the systematic loan growth during FY22E/FY23E is likely to be between 9% and 13%. According to the brokerage, adequate contingency buffer by banks is also a positive sign. Banks have put in place credit cost control and RoEs are expected to remain high going forward. It is estimated that the RoA/RoE of private banks may improve to 1.9% and 16.7% by FY24. Whereas in public sector banks it can be 0.9% and 3.7%.
December quarter was better
The results of most banking and financial companies have been better in the December quarter. From loan growth to asset quality, there is improvement in everything. Credit cost is under control and balance sheet is getting stronger. There is a pick-up in NII growth, so revival is expected in the capex cycle as well. The NPL ratio of most banks has come down.
Best Largecap and Midcap Stocks to Invest
Brokerage houses prefer largecap banks and financial stocks as their earnings outlook and valuations are attractive. The brokerage says that due to a strong balance sheet, large cap banks can easily deal with the challenges of macro conditions.
top picks
ICICI Bank, SBI, Axis Bank, Indusind Bank, Bank of Baroda, Muthoot Finance, Shriram Transport Finance Corporation, SBI LIFE, ICICI Prudential Life Insurance, ICICI Securities, IIFLW and ANGEL ONE
(Disclaimer: Stock investment advice is given by the brokerage house. These are not the personal views of The Financial Express. Markets are risky, so take expert opinion before investing.)
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