Future of Nifty50 Banking On Banks WWW - Nooreshtech.co - .In

June 22, 2022
Future of Nifty 50 –
Banking on ‘BANKS’
Nooresh Merani & Harsh Doshi
www.nooreshtech.co.in Follow Us On
Nifty 50 – Sector representation
Sector Weights
Top 3 sectors holds 66% weight in Nifty which
Financial Services 35.66
includes Financial Service, IT and Oil & Gas
Information Technology 15.88
Oil, Gas & Consumable Fuels 14.26
Fast Moving Consumer Goods 8.24 Followed by 14% i.e. 80% of the index in
Automobile And Auto Components 5.64 from FMCG and represented by 5 sectors
Auto combines only
Healthcare 3.91
Consumer Durables 3.05
Construction 2.75
Rest 20% weight
Metals & Mining 2.75 represented by
Telecommunication 2.28 other 9 sectors
Power 2.12
Construction Materials 2.12
Services 0.73
Chemicals 0.59 Weightages as per May
2022
Nifty 50 – Financial Services Sector
Symbol Industry Weightage (%)
HDFCBANK Banks 8.38
ICICIBANK Banks 7.21
25% of Financial Services
KOTAKBANK Banks 3.74
sector is represented by
AXISBANK Banks 2.49 Further HDFC is set to
‘Banks’
merge with HDFC Bank
SBIN Banks 2.47
which will increase the
INDUSINDBK Banks 0.83 weight of Banks even
9% of Financial Services
HDFC NBFC 5.75 more
sector is represented by
BAJFINANCE NBFC 2.23 ‘NBFC’s’
BAJAJFINSV NBFC 1.08
HDFCLIFE Insurance 0.77
Only 1.5% represented by
SBILIFE Insurance 0.71 ‘Insurance’
Total weight of Financial Services at 35.66%
Nifty 50 – Information Technology Sector
INFY Information Technology 7.58 12.38% represented by Infy
and TCS out of 15.88%
TCS Information Technology 4.80
HCLTECH Information Technology 1.52
TECHM Information Technology 1.01 Rest 3.5% by Hcltech, Techm
and Wipro
WIPRO Information Technology 0.97
Nifty 50 – Oil and Gas Sector
RELIANCE Oil, Gas & Consumable Fuels 12.51 Reliance represents 12.5%
ONGC Oil, Gas & Consumable Fuels 0.76 weight out of total 14.26%
represented by Oil and Gas
COALINDIA Oil, Gas & Consumable Fuels 0.56
BPCL Oil, Gas & Consumable Fuels 0.43
Nifty 50 – Who does the Heavy Lifting?
2) HDFC Bank – 8.38%
4) ICICI Bank – 7.21%
5) HDFC – 5.75%
7) Kotak Bank – 3.74%
Sector Weights
3) Infosys – 7.58%
Financial Services 35.66
6) TCS – 4.80%
Information Technology 15.88
Oil, Gas & Consumable Fuels 14.26 1) Reliance – 12.51%
Fast Moving Consumer Goods 8.24 8) ITC – 3.26%
Automobile And Auto Components 5.64 9) HUL – 2.89%
Nifty 50 – Stocks representation
Stock Name Weightage
Top 5 weights =
RELIANCE 12.51 41% of Nifty
HDFCBANK 8.38
INFY 7.58
ICICIBANK 7.21
HDFC 5.75
TCS 4.80 Top 10 weights =
KOTAKBANK 3.74 59% of Nifty
ITC 3.26
HINDUNILVR 2.89
LT 2.75
AXISBANK 2.49 Top 20 weights =
SBIN 2.47
77% of Nifty
BHARTIARTL 2.28
BAJFINANCE 2.23
ASIANPAINT 1.78
HCLTECH 1.52
MARUTI 1.46
M&M 1.36
SUNPHARMA 1.28
TITAN 1.27
What can move Nifty?
• Top 3 sectors in Nifty are ‘Financial Services’, ‘Information Technology’ and ‘Oil
and Gas’
• As seen in previous slides ‘Financial Services’ is dominated by ‘Banks’ and ‘Oil and
Gas’ is dominated by ‘Reliance Industries’
• Banking as a sector has the highest weight in Nifty at around 25%
• The weight of Banking will increase further after the merger of HDFC Limited into
HDFC Bank
• Move of IT and Reliance Industries have already been played out since March
2020 (Post Covid)
• Is it time for Banks to take the lead?

Pre Covid to Now – Sectoral Moves ?
• Nifty IT Index up 60-65% from the highs of pre covid. Even after being Down
almost 25-30% from peak.
• Reliance Inds up 50-53% above pre covid highs.
• Nifty Pharma 40% , Nifty Commodities 30% , CPSE 20%, FMCG 20%. Almost all
stocks/sectors better than pre covid ( start of 2020).
• Nifty Bank Dec 2019= 32613. Today= 33135. Nifty 50 around 12200 on Dec 2019.
• NIFTY BANK is at an Equivalent of 12500 NIFTY.
• NIFTY50 today at 15550. BANK NIFTY at 12500.
Nifty Bank – Leader from 2009. Back Again ?
• Made a new high 20% higher in 2010. Nifty did not.
• Nifty 2018-2020 up 11-12%. Bank Nifty up 18-19%.
• Bank Nifty lost leadership in the Covid Fall.
• Going forward if we are getting into a Post Covid world. Is it time for Bank Nifty to
take leadership in any major trend.
• Post Covid Nifty IT got the maximum re-rating ( P-E and Relative Price Moves.)
This looks similar to 2015 Pharma Top. Reliance Inds and every other small sector
has done well.
• So a bigger fall to 12500-15000 or a rally at 18600 would be difficult without the

outperformance of Banks in the trend.
Nifty Chart
2021
2020
2018
2015 2017
2007 2011 2014

2020
Bank Nifty Chart
2021
2020
BN made a new 2018 2022
high in 2010 –
2015 2017
20% higher and
Nifty did not
2014
2010 2013 2020
2010
June 2009 – Nifty shifts to

Free Float and Banks weights
keep increasing.
Nifty Bank to Nifty - Ratio Chart
2014 - 2020
Inline with Nifty with

2014 - 2020
undeperformance in 2012 ( Pharma
did well)
Ratio keeps increasing Post Covid.

with Bank doing better. Leadership Gone.
If not Banks, then what?
• Do you think Auto’s can move the needle for Nifty with just 5.6% weight!
• Do you think FMCG companies with 8.24% will be the next leader which will take
Nifty to new highs?
• Why Banking?
1. Heavy Weight in Nifty
2. Past leadership history
3. Move in IT and Reliance is exhausted
4. Cleaner Balance Sheet
5. Uptick in Credit Cycle
6. Historical High Provisions
7. Years of underperformance (Except a few)
Don’t believe ‘Banks’ will move?
If you don’t believe banks can take leadership, we would recommend the following
things to you
1. Do not invest in Nifty Index funds

2. Do not invest in Large cap Mutual Funds
3. Start looking out for Mid cap and Small cap funds ( Increase Weight)
4. Start looking out for Mid cap and Small cap ideas
It would be very difficult for Nifty to go to new highs without the Banks
participation in the rally
Bank Nifty - Constituents
Symbol Weights
HDFCBANK 32.95%
Top 2 has 60% weight
ICICIBANK 26.57%
KOTAKBANK 13.28%
AXISBANK 10.35% Top 5 has 92% weight
SBIN 9.55%
INDUSINDBK 2.45%
BANDHANBNK 1.31%
BANKBARODA 1.01%
FEDERALBNK 0.94% Rest 7 has only 8% weight
AUBANK 0.64%
PNB 0.49%
IDFCFIRSTB 0.46%
Historical Returns –
Bank Nifty
Constituents
Historical Returns – HDFC Bank
2020
2022
> Still available at 2020 prices

> 2 years – no returns
Historical Returns – ICICI Bank
Took leadership post
covid, still only 27%
up from 2020 highs
11 years of sublime returns
2020 2022
2019
2015
2008
Historical Returns – Kotak Bank
2020
2018
2021 2022

> 2 years – no returns
> 20% up from 2018 (4 years)
Historical Returns – Axis Bank
2015 2016 2018-2019
2019 2020-2021 2022
7 years of absolutely 0 returns
Historical Returns – State Bank Of India
2010 2015 2017 2019

2022
2021
> 10 years of 0 returns

> Up 28% in last 2 years
Historical Returns – Indusind Bank
2017 2021
2019
2015 2016 2021 2022

> Available at 2015 prices
> 60% down from 2018 peak
Historical Returns – Bandhan Bank
2021 > 44% below its listing price

2020
> Underperformer
2018
2022
Historical Returns – Bank of Baroda
2007 2009 2020 2021
2013 2018 2022

> 15 years of underperformance
Historical Returns – Federal Bank
2015 2016
2019 2022
2007 2010 2013
2020
2016
> Available at 2015 prices
> No returns since 3 years
Historical Returns – AU Small Finance Bank
2021-2022
2020
2018
2019
2022
> At pre covid highs

> Consolidating since 2 years
Historical Returns – Punjab National Bank
2020
2006 2009 2016 2018
At 15 years low 2022
Historical Returns – IDFC First Bank ( Hope )
2017 2021
2020
2018 2022
> Below IPO Price
> Available at 2018 lows
Historical Returns -
Other Banks
Historical Returns – DCB Bank ( Dark Horse )
12 years – same price
2010
2016 2020 2022
Historical Returns – Canara Bank ( Survivor)
Back to same levels as were 16

years back
2006 2009 2016 2021
Historical Returns – City Union Bank ( Comeback )
2017 2020 2022

2008 2011 2014 Available at 2017 prices
Almost Dead Banks.
Small to Big Migration.
( Was PSU to Private before)
Historical Returns – IDBI Bank
Nowhere in 22 years
2000
2004 2009 2022

2014 - 2018 2020
Historical Returns – IOB
Below 2004 prices
2016 2021
2004 2009 2013
Historical Returns – Yes Bank ( Dead )
2008 2010 Dead or Not?
2011 2013 2020
Historical Returns – Union Bank
Below 2004 prices
2019
2004
2007 2008 2013 2016
Historical Returns – Indian Bank
In the same range for 15 years
2010
2007 2012 2019
2009 2013 2020
Historical Returns – Bank of India
Below 2004 prices
2004 2021
2006 2016
Historical Returns – Central Bank
At a 13 year low
2018 2021
v
2009 2014 2016
Historical Returns – UCO Bank
At a 16 year low
2019
2006
Historical Returns – Bank of Maharashtra
Stock near 2006 levels
2019
2006 2009 2022
Historical Returns – Punjab and Sind Bank
2012
2014
2017
Falling since listing
2019
2016
Historical Returns – RBL Bank
2018 2018 2019

All time lows
2020 2022
Historical Returns – Equitas Small Finance Bank
2021-2022
New listing. Back to near listing price
Historical Returns – Karur Vysya Bank
2008 2021
2012 2013
Below 2008 highs
Historical Returns – CSB Bank
2020 2022
Flattish
Historical Returns – Ujjivan Bank
All time lows

2021
2019 2021
Historical Returns – J&K Bank
Near 2004 prices
2020
2004 2009 2022
Historical Returns – Karnataka Bank
Near 2004 prices
2004
2009 2012 2020
Historical Returns – Fino Payments Bank
New listing, halved since listing
2022
Historical Returns – South Indian Bank
2019
v
2011 2016
Nearing 2002 prices
2002
2005 2006 2009 2020
Historical Returns – Suryoday Small Finance Bank
Falling since listing
2022
Historical Returns – Dhanlaxmi Bank
All time lows
2019
2006 2013 2017
Bank Nifty – Technically an investment buy on dips with stoploss at 32155 – March Lows. Momentum triggers 34500/36000
Conclusion – Banks to Lead the Trend.
• If you believe Banks can become leaders. Time to create a basket.
• Outperformers = SBI & ICICI . Steady Big One = HDFC and Kotak.
• Potential Performers= Axis Bank, Indusind Bank, Federal Bank.
• DarkHorses = DCB Bank, Canara Bank, City Union Bank, IDFC First Bank.
• Would still avoid the Dead Ones.
• Since IT and Oil and Gas has played out. One will need to be more tactical in
their investing approach in largecaps. ( Buy Dips/Sell Rallies/Buy Momentum. )
• Midcaps and Smallcaps have seen a larger correction. Time to increase
weights here for Outperformance.
• A fall to 14500-12500. ( All negative consensus) needs a crack in banks which
would imply Banks going to 10k Nifty. Looks difficult but makes it clear Banks
are the decider.
We like Banks as Leaders. Will trade on confirmations.
More convinced on Smallcaps/Midcaps as Opportunity.
• The Broader Market of Midcaps/Smallcaps has seen a good correction.

• 42% of stocks down more than 40% from 52 week highs.
• Such breadth is a good start to start focusing on Smallcaps/Midcaps.
• A deeper weakness has been seen in 2008/2013/2020 but for a short period of
time. We do not see it to be a similar cycle but more closer to 2015-
2016/2004/2006 kind of correction.
• The bigger opportunities in Smallcaps/Midcaps given the Broader market has
not done much from Jan 2018.
The Market View.
• The Consensus is negative given the Interest Rate, Fed, Russia Ukraine,
Inflation etc etc.
• The Downside consensus is anywhere between 12400-15000 Nifty.
• Should you be worrying of an uncertain downside risk of 10-20% or focus on
possibility of high returns over next 3-5 years ?
• Irrespective of how Bearish one is for next 1-3-6-12 months the next 1-3-5-10
years look more promising.
• The next few months are going to be of multiple opportunities to
invest/trade in smallcaps/midcaps and tactically in largecaps.
• Remember 2009/2013/2016/2019/2020. The biggest losses come by

missing out on Big opportunities !!
• One can also be ready to buy on the way up like in 2009/2014/2020. But
be alert and not biased.
The Big Picture
India Story Baaki Hai
The FII – DII Story
• FIIs have sold almost 3.75 lakh crs since October 2021. ( provisional
Secondary Market Data)
• As per Sebi data which gets adjusted for IPO etc. The Number comes closer
to 2.9-3 lakh crores.
• ( Highest since 2008 in absolute terms ( 60-90k cr) , longest in time period ( 9
months now ) , Getting close to 5% of their peak holding.)
• FIIs still own 19-20% of Indian Market Cap which would be closer to 40-50
lakh cr
• How long can FIIs can keep selling is anybody's guess.
• But will they keep selling when things are more certain/better in the future ?
Highest since 2008 in absolute terms, longest in time period, nearing in %
of holding
The FII – DII Story – Selling Data
Flows to Float
• India Total Market Cap = 240 lakh crores.
• FIIs own 19-20% or lesser. FDI 2-5%.
• Promoters 45-50%. DIIs 12-15%.
• Roughly 10-15% of Float available.
• Float equal to 24-36 lakh crores.
• The Lack of Liquidity used to hurt Indian Markets in Bear Markets. FIIs selling
5% of their peak holding value led to 60% drop in 2008.
• Today a similar selling value is down 20%.
The Flows to Float – A heady Cocktail
3 Components needed for a Heady Cocktail of Bull Market.
1) Huge Gush of Liquidity – Inflows.
2) Reduced Floating Stock.
3) Earnings Growth and Visibility.
Ever since 2008 there is always an ingredient missing. Sometimes Earnings Growth, sometimes
Flows. With Default Domestic Inflows increasing one part seems to be stubborn n sticky.
We finally have earnings growth but visibility is a uncertain. Foreign Inflows can come in certain
times with earnings visibility.
Can we eventually see all 3 fall in place in coming years.

Something similar to 2003-2008 ?
The India Money – Retail/HNI/Indian Tsunami.
• Default Inflows of Domestic. ( Sticky )
• SIP = 1.3-1.5 lakh cr. EPFO= 25k-35k cr. LIC= 50-70k cr. ( Not considering small
insurance, Direct MF inflows etc.)
• Equal to 2-2.5 lakh crores. Almost equivalent of buying 5-10% of Float if FIIs are
not sellers.
• What happens when FIIs also become buyers ?
• What happens when earnings continue to grow. ( 800 eps becomes 700 or 1000.)
• Will there be enough new Float ? ( IPOs, issuances.)
• In the next 1-5 years we may get into the ideal cocktail of bull market.
• Earnings Growth + High Inflows + Low Float = Bull Market.
We can be looking at a long and steady period in future.
Be Long Term Bullish. Increase Equity Exposure over next months steadily.
Disclosure & Disclaimer
Mr. Nooresh Merani
SEBI Registered Research Analyst Registration No. INH000008075
Disclosures
•The analyst may have holding or position in the securities recommended herein.
•The analyst has no connection or association of any sort with any issuer of products/ securities recommended herein.
•The analyst has no actual or potential conflicts of interest arising from any connection to or association with any issuer of
products/ securities, including any material information or facts that might compromise its objectivity or independence in the
carrying on of recommendation services.
•The analyst has not received any kind of remuneration or consideration form the products/ securities recommended herein.
•To access the key features of the securities, particularly, performance track record please go to the below links:
• www.bseindia.com
• www.nseindia.com
Mr. Nooresh Merani

SEBI Registered Research Analyst
Registration No. INH000008075
Detailed Disclosure = https://nooreshtech.co.in/ra-disclosure
Disclaimer = https://nooreshtech.co.in/disclaimer
Thank You
This is a Free Report prepared by
Nooresh Merani
9819225396
www.nooreshtech.co.in
[email protected]
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June 22, 2022

• Banking as a sector has the highest weight in Nifty at around 25%

• Is it time for Banks to take the lead?

• Reliance Inds up 50-53% above pre covid highs.

• NIFTY BANK is at an Equivalent of 12500 NIFTY.

• NIFTY50 today at 15550. BANK NIFTY at 12500.

• Bank Nifty lost leadership in the Covid Fall.

• So a bigger fall to 12500-15000 or a rally at 18600 would be difficult without the

2007 2011 2014

June 2009 – Nifty shifts to

Inline with Nifty with

Ratio keeps increasing Post Covid.

1. Do not invest in Nifty Index funds

> Still available at 2020 prices

> Still available at 2020 prices

2015 2016 2018-2019

2019 2020-2021 2022

7 years of absolutely 0 returns

2010 2015 2017 2019

> 10 years of 0 returns

2015 2016 2021 2022

2021 > 44% below its listing price

2007 2009 2020 2021

2013 2018 2022

> At pre covid highs

12 years – same price

2016 2020 2022

Back to same levels as were 16

2006 2009 2016 2021

2017 2020 2022

2004 2009 2022

Below 2004 prices

2004 2009 2013

2008 2010 Dead or Not?

2011 2013 2020

Below 2004 prices

2007 2008 2013 2016

2009 2013 2020

Below 2004 prices

2009 2014 2016

Stock near 2006 levels

2006 2009 2022

2018 2018 2019

All time lows

Near 2004 prices

Near 2004 prices

2009 2012 2020

New listing, halved since listing

2005 2006 2009 2020

Falling since listing

All time lows

2006 2013 2017

• The Broader Market of Midcaps/Smallcaps has seen a good correction.

• Remember 2009/2013/2016/2019/2020. The biggest losses come by

• FIIs own 19-20% or lesser. FDI 2-5%.

• Promoters 45-50%. DIIs 12-15%.

• Roughly 10-15% of Float available.

• Float equal to 24-36 lakh crores.

• Today a similar selling value is down 20%.