Nifty Bank Index Surges Over 800 Points: Sharpest Rally Since November 2024

On January 20, 2025, at 12:33 PM, the Nifty Bank Index witnessed a sharp surge, rising by over 800 points or 1.69%, marking its most significant single-day rally since November 25, 2024. Out of the 12 constituent stocks, 11 traded in the green, reflecting a robust advance-decline ratio for the day.

Despite the strong rally on January 20, 2025, the Nifty Bank Index is down by 2.80% on a year-to-date (YTD) basis as of the same date.

Key Contributors to the Rally

3major banking stocks—Kotak Bank, HDFC Bank, and SBI—played a pivotal role in driving the gains. Collectively, these 3 banks contributed 614 points to the overall rise in the Nifty Bank Index.

In contrast, Axis Bank was the only stock trading in the red during this rally, bucking the overall positive sentiment in the sector.

Kotak Bank: Reviving Investor Confidence

Kotak Bank emerged as a sentiment booster for the banking sector. The stock’s positive performance was underpinned by its improving net interest margin (NIM). After declining for 3 consecutive quarters, the NIM stabilised and expanded to 4.93% in Q3 FY25, up from 4.91% in Q2 FY25. This stability has reassured investors about the bank’s financial health and operational efficiency.

Evaluating the Sector: Nifty Bank’s Price-to-Book Ratio

The Price-to-Book (P/B) ratio, a crucial metric for evaluating banking stocks and the sector, reflects the current valuation trends:

• P/B Ratio on January 17, 2025: 2.14, close to its 1, 3, and 6-month lows.
• The ratio is also near its 1 and 2-year lows. 
• Furthermore, it is trading below its 1, 3, and 6-month averages, as well as its 2 and 5-year long-term averages.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.