A State Bank of India branch at Pedder Road, Mumbai. (Photographer: Anirudh Saligrama/BloombergQuint)

Banks To Drive Nifty’s Earnings Growth In Next Two Fiscals

Financial sector companies are expected to drive earnings growth of the benchmark Nifty 50 Index over the next two fiscals, according to Bloomberg.

Four out of the top five Nifty companies with highest profit growth visibility over the same period, according to Bloomberg consensus estimates, are banks.

Banks To Drive Nifty’s Earnings Growth In Next Two Fiscals

Tata Motors Ltd. has the highest profit growth estimate for FY19-21—albeit on a relatively lower base—as the automaker is expected to stage a turnaround, according to Bloomberg.

Motilal Oswal said in its strategy note for the third quarter that the earnings of banks are expected to accelerate due to:

  • Revival in credit growth.
  • Moderation in slippages.
  • Reduction in total stressed loans.

Morgan Stanley said in a note that it expects the strong earnings growth of corporate lenders to be driven by improving balance sheets. It also suggested these stocks were undervalued bets, with their present valuations not reflecting their potential earnings growth.

More than 70 percent of the analysts tracked by Bloomberg have a ‘Buy’ recommendation on each of these banking stocks, with an upside potential ranging between 6-32 percent. The upside is the highest for State Bank of India and least for Axis Bank Ltd.