Banking stocks, particularly state-run banks, have rallied sharply over the last few days. The CNX PSU Bank index gained 13 per cent last week as compared to a two per cent gain in the broader Nifty.
Oriental Bank of Commerce, Union Bank and Punjab National Bank have rallied around 13 per cent each, while Bank of India, Allahabad Bank and State Bank of India have risen 10-11 per cent over the last week.
Investors have been buying banking stocks on hopes of a recovery in the domestic economy; central bank’s potentially easing monetary policy and broker upgrades.
The latest brokerage to turn positive on banks is Barclays, which on Monday upgraded SBI to overweight from equalweight. Barclays also upgraded Bank of Baroda and Punjab National Bank to equalweight from underweight. It continues to retain its overweight call on private lenders such as ICICI Bank, Axis Bank and HDFC Bank.
Barclays expects a gradual macro recovery and says FY15 will likely be another tough year for banks. However, it expects well capitalized banks to do well as the economy recovers. More accommodative monetary stance will bring further positivity to its outlook, Barclays added.
Barclays target on Axis Bank is Rs. 1,649; on HDFC Bank is Rs. 824, on SBI Rs. 2,250 and on ICICI Bank Rs. 1,332.