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Bank Basket - A Portfolio of Banks you Must Own

Without credit, our economy will collapse. Given this scenario, can you afford to ignore financing stocks? There is a strong reason why financials comprise 40% of Nifty 50 index and here is a portfolio we have constructed comprising the best banks of India which will benefit from the revival in corporate credit cycle and increasing culture among millennial of taking retail loans.

Why Should you Invest in this Portfolio...

Asset Quality is Improving with Gross-Non Performing Assets Trending Downwards

Gross Non-Performing Assets (GNPA) had peaked in FY18 at 11.2% for scheduled commercial banks. Since then, asset quality at banks is improving. Despite the pandemic, GNPA has trended lower to 7.3% in FY21 and further to 6.9% at end of September 2021.

Improving asset quality implies lower provisioning and higher profitability for the banks. This will keep profitability of banks in good stead going forward.

Financials Comprises 35% of Nifty Index. Ignoring this Space Can Create Under performance

Historically, financials have delivered good return for investors. Rs 1 lakh invested in Bank Nifty at the beginning of 2000 would have grown to Rs 36 lakhs at the end of fiscal year 2022 implying absolute returns of almost 3500% & compounded annual growth rate (CAGR) returns of 17.5%.

GST Collections Very Strong Indicating Credit Growth to Strongly Pick-Up

GST collections are very strong & lately are clocking above Rs 1.3 trillion level every month in fiscal year FY22 as represented by the red bar. This indicates that the economy is on strong footing & credit growth will strongly pick-up going ahead. Credit growth has already risen from levels of 5.7% in April 2021 to 8-9% in March 2022 quarter.


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