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Quote on Story idea and view on Nifty bank By Vinod Nair, Head of Research at Geojit Financial Services.

"The banking sector has demonstrated strong resilience so far this year, supported by multiple factors. 1) Strong quarterly earnings driven by robust credit growth, margin expansion, improved asset quality and lower provisioning 2) FIIs return to buying mode due to favourable economic factors 3) Attractive valuation.  
We believe that the rally is still in its early stages and that valuations have room to rise further, given improved fundamentals. Profitability is expected to improve with a robust credit growth outlook and improving asset quality. Additionally, in the rising interest rate scenario, banks with a higher proportion of flexible loans will showcase margin expansion. However, we expect that the mark-to-market impact of rising bond yields on treasury income will hurt banks, particularly PSUs in the short term, who have higher investments in bonds. We continue to recommend top private sector banks that are better poised to reap the benefits of economic recovery with stronger balance sheets and neat loan books. The sector is currently trading at its 5year averages, which indicates significant room for expansion. However, the near-term trend will be dictated by the movements in FII activities"

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