Bank stocks: Bank stocks surge on cleaner books and loan pick-up, can rise further

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Mumbai: Bank stocks may still have some more steam left after the recent run-up, said analysts. The Bank Nifty index, comprising shares of lenders, surpassed the crucial hurdle of 40,000 last week, opening up the possibility of the benchmark rising another 3-5% in the short-term. The index closed at 40,415.70 on Friday

“The Bank Nifty index surpassed the crucial hurdle of 40,000 on a closing basis which clears the room for further upside on the index,” said Kunal Shah, senior technical analyst,

. “The index momentum oscillators are in strong buy zone, confirming internal strength. The index will likely test the level of 41,000-41,500 on the upside, and at the lower-end support remains at the 39,000 level.”

Analysts said the bullish momentum means the Bank Nifty index could outperform Nifty in the near-term. The Nifty Bank index has rallied 5.7% and 15.19% in the last one month and three months, respectively. The Nifty 50 index has gained 1.76% and 8.22% during this period.

Santosh Meena, head of research,

, said it will be crucial for the Bank Nifty to cross the immediate hurdle zone of 40,800-41,000 to extend upside. “Above this level, we can expect a rally towards the 41,800-42,000 zone. On the downside, 40,000-39,500 will act as a strong demand zone,” he said.

In the past month, investors and traders have been buying shares of public sector and smaller private lenders. Banks such as RBL, DCB,

, Suryoday Small Finance, Ujjivan, Indian Banks, , and have surged between 15% and 30% in the last one month. Among the larger banks, barring Kotak, all others have gained between 5% and 10% in one month.

With banks cleaning up their balance sheets, analysts believe there is scope for loan growth acceleration.

“The demand for loans from retail and small and medium-sized enterprises has resumed, and capacity utilisation has improved, leading to normalisation of loan growth for Indian banks,” said Ashish Chaturmohta, head of research, Services.

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