ICICI Bank, HDFC Bank: Banking shares soar, NIFTY Bank near record high; check expert views, Q4 estimates

Banking shares were witnessing strong buying interest on Thursday, April 17, ahead of earnings announcements by the country's top two private lenders, HDFC Bank and ICICI Bank, on Saturday.

The measure of banking shares on the National Stock Exchange surged for the fourth session in a row, and in the last four sessions, the Nifty Bank index has surged as much as 4,167 points, or 8.29%, data from the National Stock Exchange showed.

In intraday deals, the NIFTY Bank index advanced 2.43% or 1,289 points to hit a seven-month high of 54,407.20.

With Thursday's surge, the NIFTY Bank index was trading near its record high of 54,467.35, touched on September 26, 2024, a mere 60 points short of the record high level.

Here are key factors boosting the rally in banking shares.

Ten out of 12 shares in the NIFTY Bank index were trading higher, led by ICICI Bank's nearly 4% gain. The stock rose as much as 3.86% to hit a fresh 52-week high of ₹1,408.80 ahead of its earnings announcement on Saturday, April 19.

Analysts at multiple brokerages expect ICICI Bank to report double-digit growth in net profit on the back of strong net interest income and steady margins.

State Bank of India, Axis Bank, Kotak Mahindra Bank, HDFC Bank, Canara Bank and IndusInd Bank also rose 1.3-3.3%.

Low inflation projections, repo rate cuts from the Reserve Bank of India and expectations of good monsoon rainfall augur well for the banking sector, analysts said.

The banking shares caught investors' interest after the RBI announced a repo rate cut last week in a move to support growth.

Following the rate cut by the RBI, a whole host of banks announced interest rate cuts, thereby reducing borrowing costs.

Meanwhile, expectations of improvement in asset quality and expanding net interest margins in the upcoming results season are also leading to buying interest in banking shares.

Global investment bank Goldman Sachs last week said that it sees early signs of improvement in asset quality and operating profitability, adding to the bullish sentiment for banking shares, analysts added.

"In the near term the data points could remain soft, given sluggish credit growth (see recent report), impact on NIMs due to lead/lag between loans vs. deposits and elevated credit costs, driving modest EPS cuts of 2% on average for our coverage for FY26E. We believe the sector could be closer to the bottom of the cycle, with cuts to consensus EPS forecasts for FY26-FY27E to end in 1HFY26," Goldman Sachs said in a report.

The global investment bank added that the asset quality of the banking sector is showing signs of stabilisation in most loan segments, noticeably in the unsecured loan segment, except for business banking loans for NBFCs.

"We expect the slippages to start moderating from 2HFY26, and consequently, the credit costs will also start to moderate from 2HFY26, as we lower our credit-costs assumptions," Goldman Sachs added.

Goldman Sachs further said that banks will have a manageable impact of tariffs on their earnings.

As of 2:06 pm, the NIFTY Bank index traded 2.31% higher at 54,344.55, outperforming the NIFTY50 index, which was up 1.76%.