The banking sector is a significant player in the nation’s economy. Banking stocks are one of the investing components that are often used to achieve portfolio diversification. During 2023, most banks reported a healthy performance. However, choosing the right ones for your portfolio can be difficult with an array of banking stocks available. This article provides insights into the top banking stocks in India for long-term investing in 2024, along with guidance on identifying and selecting suitable options.
Let’s understand all the details regarding banking stocks.
What are Banking Stocks?
Banking sector stocks represent ownership shares in companies that provide banking and financial services. These companies include commercial banks, investment banks, and other financial institutions. In simple terms, when you invest in banking stocks, you essentially own a part of the company and gain the potential to benefit from its future performance.
Banking Sector in India – Overview
The Indian banking sector is undergoing significant transformations, driven by factors such as:
- Digitalization: The increasing adoption of digital technologies is reshaping the banking landscape, with banks actively investing in mobile banking, online banking, and artificial intelligence (AI) to enhance customer experience and operational efficiency.
- Financial Inclusion: Government initiatives and regulations promote financial inclusion, leading to a wider reach of banking services to unbanked and underbanked populations, presenting significant growth opportunities for banking stocks.
- Consolidation: The Indian banking sector has witnessed consolidation in recent years, with mergers and acquisitions to create more robust entities. This can increase efficiency, better risk management, and enhance competitiveness.
List of Top Banking Stocks in India (As per the National Stock Exchange)
While the “best” banking stocks can be subjective and depend on individual investment goals and risk tolerance, some top contenders in the stock market include:
Top Banking Stocks (As per the National Stock Exchange)
| Banking Stock | Market Cap in Crores as of 5.02.2024 |
| State Bank of India | ₹ 6,95,317 |
| Central Bank of India | ₹ 54,690 |
| Indian Bank | ₹ 71,248 |
| Punjab National Bank | ₹ 1,39,950 |
| Bank of Maharashtra | ₹ 43,643 |
| HDFC Bank Ltd. | ₹10,83,895 |
| Union Bank of India | ₹ 1,13,817 |
| ICICI Bank | ₹ 7,61,125 |
| Axis Bank | ₹ 3,39,007 |
| Kotak Mahindra Bank | ₹ 3,41,133 |
Banking Stocks in India 2024
Here, we look at the top stocks in banking sector in India 2024.
SBI Bank
Profile: The State Bank of India is an Indian Multinational, public sector banking and financial services body. It is the largest Indian commercial bank with a rich legacy of over 200 years.
| Market Cap | CMP (as of 5th March, 2024) | All-Time High Level | PE Ratio | 5 yr CAGR Return | ROCE(FY 2023-24) |
| ₹ 6,95,317 Cr | ₹779 | ₹781 | 10.1 | 22% | 5.20% |
Quarterly Results: During Q3FY24, the bank witnessed a significant 23% surge in total interest income, reaching Rs. 106,734 crores, compared to Rs. 86,616 crores in Q3FY23. The net profit after tax for the quarter amounted to Rs. 9,164 crores, marking a notable 35% decline from Rs. 14,205 crores recorded in the corresponding quarter of the previous year. Notably, net NPAs decreased to 0.64% in Q3FY24 from 0.77% in the same period last year.
Central Bank of India
Profile: The Central Bank of India, is one of the oldest and largest commercial banks in India. It serves as the nation’s central monetary authority, regulating the country’s banking and financial system.
| Market Cap | CMP (as of 5th March, 2024) | All-Time High Level | PE Ratio | 5 yr CAGR Return | ROCE(FY 2023-24) |
| ₹ 54,690 Cr | ₹63 | ₹76.9 | 22.4 | 15% | 4.29% |
Quarterly Results: In Q3FY24, the bank’s total interest income surged by 16% to Rs. 7,841 crores, up from Rs. 6,746 crores in Q3FY23. Net profit for the quarter stood at Rs. 734.4 crores, marking a 35% increase compared to Rs. 473.4 crores in the corresponding quarter of the previous year. Notably, net NPAs decreased to 1.28% in Q3FY24 from 2.09% in the same period last year.
Indian Bank
Profile: Indian Bank is a leading Indian PSU bank that was incorporated on March 5, 1907, and commenced operations on August 15, 1907 by V. Krishnaswamy in Chennai.
| Market Cap | CMP (as of 5th March, 2024) | All-Time High Level | PE Ratio | 5 yr CAGR Return | ROCE(FY 2023-24) |
| ₹ 71,248 Cr | ₹529 | ₹574 | 9.32 | 16% | 4.55% |
Quarterly Results: In Q3FY24, the bank’s total interest income surged by 20% to Rs. 14,202 crores, up from Rs. 11,836 crores in Q3FY23. Net profit for the quarter stood at Rs 2,205 crores, marking a 51% increase compared to Rs. 1,454 crores in the corresponding quarter of the previous year. Notably, net NPAs decreased to 0.53% in Q3FY24 from 1.0% in the same period last year.
Bank of Maharashtra
Profile: Among the oldest banks in Maharashtra, the Bank of Maharashtra (BoM) was registered in 1935 and commenced operations in 1936.
| Market Cap | CMP (as of 5th March, 2024) | All-Time High Level | PE Ratio | 5 yr CAGR Return | ROCE(FY 2023-24) |
| ₹ 43,643 Cr | ₹61.6 | ₹70 | 11.8 | 36% | 4.44% |
Quarterly Results: During Q3FY24, the bank experienced a substantial 25% surge in total interest income, reaching Rs. 5,171 crores, compared to Rs. 4,129 crores in Q3FY23. The net profit for the quarter stood at Rs. 1,036 crores, marking a notable 33% increase from Rs. 775 crores in the corresponding quarter of the previous year.
HDFC Bank
Profile: HDFC Bank, established in 1994, is one of India’s leading private sector banks. It offers a wide range of banking and financial services, including retail banking, corporate banking, and investment banking.
| Market Cap | CMP (as of 5th March, 2024) | All-Time High Level | PE Ratio | 5 yr CAGR Return | ROCE(FY 2023-24) |
| ₹10,83,895 Cr | ₹1427 | ₹1758 | 15.9 | 6% | 6.24% |
Quarterly Results: In Q3FY24, the bank witnessed a significant 23.9% increase in total interest income, reaching Rs. 22,990 crores, compared to Rs. 28,400 crores in Q3FY23. The net profit for the quarter amounted to Rs. 16,300 crores, indicating a noteworthy 33% rise from Rs. 12,200 crores in the corresponding quarter of the prior year.
Best Banking Stocks in India: How To Select
Selecting the top stocks in banking sector requires careful consideration of various factors. Some key aspects to evaluate include:
- Financial Health: Analyze the bank’s financial statements, including profitability, asset quality, capital adequacy, and liquidity ratios. Look for bank stocks with a strong track record of consistent profitability, low non-performing assets (NPAs), and healthy capital buffers.
- Management: Assess the experience and competence of the bank’s management team. A strong, visionary leadership team can significantly impact the bank’s future growth prospects.
- Growth Potential: Evaluate the bank’s growth strategies, focusing on new markets, digital initiatives, and product diversification. Look for banking stocks positioned to benefit from the growing Indian economy and increasing financial inclusion.
- Valuation: Compare the banking stock price to its intrinsic value based on its financial performance, growth potential, and future earnings. Avoid overpaying for stocks, even for high-performing companies.
- Dividend Yield: Consider the bank’s dividend history and future dividend prospects. If regular income is a primary objective, banks with a consistent dividend track record might be preferred.
How to Identify the Best Banking Stocks to Buy in India?
When looking to add banking stocks to your portfolio, use these ratios to identify the best banking sector stocks:
1. Price-to-Earnings (P/E) Ratio: Study a bank’s P/E ratio in the context of its historical average and industry peers. A lower P/E ratio could mean undervaluation. While, a higher P/E may be justified for banks with higher growth prospects.
2. Price-to-Book (P/B) Ratio: Banks with a P/B ratio below 1 are good to add to one’s portfolio as they may be undervalued. However, do not add banking stocks with very low P/B ratios, as this indicates potential problems.
3. Efficiency Ratio: The efficiency ratio indicates how efficiently a bank operates and how profitable it is. Add banking sector stocks with an efficiency ratio of less than 60%. Also compare this ratio to the industry average and the bank’s historical performance.
4. Loan-to-Deposit Ratio (LDR): Pick banking stocks with an LDR between 70%-85%. Banks with LDR in this range are effectively utlilizing deposits for lending and generating income. A very high LDR is not advisable as it indicates heavy risk exposure.
5. Capital Adequacy Ratio: Analyze the Tier 1 Capital Ratio and Total Capital Ratio over the years to indicate the bank’s ability to meet liabilities and manage losses.
Factors to Consider While Investing in Banking Stocks
You should consider many factors before investing in banking stocks such as:
1. Credit Risk: This is the risk arising from the bad quality of loans that can impact a bank’s profitability. Get as much information on the banks’ underwriting practices, the quality of loans and NPAs before investing in banking stocks.
2. Interest Rate Risk: Banking stocks react to interest rate changes, which can impact their profitability. Gather information about the bank’s sensitivity to interest rate changes and their total asset size before buying the top stocks in banking sector.
3.Regulatory Risks and Compliance: Changes in bank-related regulations and compliance can weigh on a bank’s profitability. The more a bank is scrutinized, the higher the possibility of its profitability being impacted.
4.Government and Apex Bank Policy Changes: Any changes to tax laws, capital requirements, and monetary policy from the apex bank impact a bank’s business and thus, its profitability.
5.Competition from Fintechs: Fintechs and small finance banks are fast emerging as competitors to traditional banks. This can have significant implications for the banking stocks.
How to Invest in Banking Stocks?
Investing in banking stocks requires careful consideration. Research individual banks’ financial health, management, growth potential, and valuation. Utilize financial resources and consider consulting a financial advisor to align your choices with your risk tolerance and investment goals. Choose a reputable broker to facilitate your purchase and remember, diversification across various banking stocks can help mitigate risk.
There are many banking stocks that can be considered for long-term investment, but it is important to understand the dynamics of the banking sector and conduct thorough research. Choosing the right banking stocks will help you enhance your investment portfolios.
The banking sector is a significant player in the nation’s economy. Investing in banking stocks can offer diversification and help you maintain a healthy balance in the portfolio.
During 2023, most banks reported healthy performance. However, with an array of banking stocks available, choosing the right ones for your portfolio can be a daunting task. This article provides insights into the top banking stocks in India for long-term investing in 2024, along with guidance on identifying and selecting suitable options. Let’s understand all the details on bank stocks.
h individual banks’ financial health, management, growth potential, and valuation. Utilize financial resources and consider consulting a financial advisor to align your choices with your risk tolerance and investment goals. Choose a reputable broker to facilitate your purchase and remember, diversification across various banking stocks can help mitigate risk.
*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
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FAQ
Which bank stock is highly valued?
From among the banking stocks being traded, the Indian Overseas Bank is highly valued. Valuations at current level are not comfortable.
Which public sector bank stock is good?
Some of the good public sector bank stocks are, UBI, SBI, Canara Bank, Central Bank of India and Indian Bank.
How many banks are listed on the stock market?
Banking stocks of 38 banks are listed on the stock market as of 8 February 2024. There are 26 private banks and 12 public sector banks that trade on the NSE.
I’m Archana R. Chettiar, an experienced content creator with
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