Best Banking Stocks in India 2024

  • 19 Apr 2024
  • Read 16 mins read

Banking stocks in India are highly attractive to investors because of their growth potential and reliable returns on dividends. In this article, we will get into the details of Banking sector stocks and discuss what they mean, how to find the best of them and the key factors to consider before investing in treasury funds. Additionally, we will shed light on the top bank stocks we will consider buying in 2024.

What Are Banking Stocks?

Banking sector shares represent shares of companies providing financial services, which includes commercial banks, investment banks, and insurance firms. Prominent private sector banks in India offer a range of financial services, including deposit-taking, lending, and funding investment products to their clients. The performance of top banking stocks in India is tied to the overall condition of the economy and the inventory marketplace. Consequently, banking sector shares play a critical position in offering liquidity to companies and people.


Banking Stocks List 2024

When considering investment options, exploring a banking stocks list can provide valuable insights. Here is the top banking stocks list.

Company Name Market Cap Stock Price
HDFC Bank Ltd11.67 trillion1,534
Kotak Mahindra Bank Ltd3.62 trillion1,820
ICICI Bank Ltd7.79 trillion1,108
Bank of Baroda Ltd1.40 trillion270
State Bank of India6.94 trillion777
Indian Bank711 billion528
Axis Bank Ltd3.35 trillion1,084
Canara Bank1.11 trillion611
Union Bank of India Ltd1.15 trillion151
Bank of India Ltd657 billion143

Disclaimer - The market capitalisation mentioned above is accurate as of 11th April 2024. However, conducting your research before making any investment decisions in these stocks is important.

Best Banking Stocks in India

Analysing a banking shares listing can assist perceive potential possibilities for growth. Let's take a detailed look at the top 10 bank stocks in India:

  1. HDFC Bank

    Known for its expansive department community, HDFC Bank is among India's largest non-public region banks. Investors often recollect it as a high funding choice due to its big selection of economic products and services.
  2. Kotak Mahindra Bank

    Kotak Mahindra Bank Ltd operates as a personal-quarter financial institution in India.It was established in 2003. Known for its numerous banking solutions catering to individuals, corporate clients, the bank gives an extensive range of offerings including debts, loans, playing cards, investment possibilities, insurance, and asset control.
  3. ICICI Bank

    Known for its modern banking answers, ICICI Bank caters to both retail and company clients, making it a favoured option in the private sector.
  4. Bank of Baroda Ltd

    With its extensive banking offerings protecting retail, company, and worldwide banking, Bank of Baroda sticks out as a main Indian public sector bank, contributing significantly to the country's financial landscape.
  5. SBI (State Bank of India)

    As the most important public sector bank in India, SBI serves a vast customer base through its considerable branch and ATM community, offering a comprehensive suite of financial offerings.
  6. Indian Bank

    Demonstrating a sturdy commitment to customer service and monetary inclusion, Indian Bank is outstanding inside the public region, contributing significantly to India's financial boom.
  7. Axis Bank Ltd

    Recognised for its progressive economic solutions, Axis Bank is a pinnacle participant within the private banking sector, providing a variety of services to its clients.
  8. Canara Bank Ltd

    With its giant network and numerous banking services, Canara Bank is a leading public sector financial institution committed to economic inclusion.
  9. Union Bank of India Ltd

    Delivering an extensive spectrum of financial services, Union Bank of India is a distinguished player within the public area, known for its strategic initiatives and consumer-centric method.
  10. Bank of India Ltd

    With a wealthy history and comprehensive variety of banking services and products, Bank of India remains trusted as a monetary accomplice contributing to the nation's monetary development.

Understand Banking Sector in India

In India, the banking sector is composed mainly of public, private, and foreign banks' stocks. Yet, the top banks for investment in India hold a lot of importance inside the country's financial system, contributing significantly to the GDP and presenting important financing and lending offerings to each company and individuals. Historically, shares from the banking sector, representing top banks for investment in India, have reliably provided traders with sustained growth and income over the long time.

 However, latest shifts and improvements, which include the emergence of fintech corporations, have transformed the conventional banking panorama. Despite those modifications, banking stocks in India have displayed resilience, adapting to these adjustments to continue delivering value to investors. Utilising a banking shares list as part of your investment strategy can improve overall portfolio performance.

How to Identify the Best Banking Stocks to Buy in India?

Identifying the top banking stocks in India based on common ratios, which requires a comprehensive approach. Here's how you can evaluate banking stocks using these ratios:

  1. Price-to-Earnings (P/E) Ratio

    - Compare the P/E ratio to the bank’s historical average and its industry peers. A lower P/E ratio may indicate the stock is potentially undervalued.

    - Take into account the bank’s growth prospects; hence, a higher P/E ratio may be justified for banks with significant growth potential.

  2. Price-to-Book (P/B) Ratio

    - Look for banks with a P/B ratio below 1.0, indicating possible undervaluation compared to their book value.

    - Exercise caution with banks having very low P/B ratios, as it can signal underlying problems.

  3. Efficiency Ratio

    - A lower efficiency ratio signifies better operational efficiency and profitability, so target banks with an efficiency ratio below 60%.

    - Compare the efficiency ratio against the industry average and the bank’s historical performance.

  4. Loan-to-Deposit Ratio (LDR)

    - An LDR ranging between 70% and 85% is generally considered healthy, indicating effective utilisation of deposits for lending and income generation.

    - Avoid banks with excessively high LDRs, which may imply risk exposure.

  5. Capital Ratios

    - Analyse critical capital ratios like the Tier 1 Capital Ratio and Total Capital Ratio, which measure a bank's resilience in losses.

Factors to Consider While Investing in Banking Stocks

Investing in the best banking requires considering several crucial factors, which are explained as follows.

  1. Regulatory Risks and Compliance Issues

    Changes in regulations can significantly affect the profitability of banking sector stocks in India. Therefore, investors should be mindful of regulatory risks when selecting the best bank shares to purchase.
  2. Credit Risk and Loan Quality

    The profitability of banks depends on the quality of loans to individuals and businesses. It's essential to assess factors like non-performing loans and underwriting practices before investing in bank stocks.
  3. Interest Rate Risk

    Banks generate revenue through interest on loans and deposits, making them sensitive to changes in interest rates. Investors should evaluate a bank's response to interest rate fluctuations when considering investments in banking shares.
  4. Technological Disruption and Cybersecurity Threats

    With increasing reliance on technology, emerging technologies and cybersecurity threats can impact a bank's profitability and share price. Investors should evaluate a bank's technological capabilities and cybersecurity measures before investing.
  5. Government Policies and Regulations

    Changes in government policies and regulations, including tax laws and monetary policies, can impact the overall performance of top Indian banks. It's important to analyse the potential impact of such policies on banking shares.
  6. Competition and Industry Dynamics

    The banking sector is highly competitive, with evolving industry dynamics influenced by emerging banking stocks. Understanding a bank's competitive position is essential for selecting the best bank shares in India.
  7. Investment Strategies

    There are various platforms for investing in banking stocks in India, including buying  individual bank shares, investing in banking ETFs or mutual funds, utilising banking-specific portfolio management services (PMS). Exploring structured products linked to banks, or opting for bank-issued fixed deposits and bonds for stable income with lower risk. Investors have to align their investment picks with their risk tolerance and investment objectives while deciding on the quality banking shares in India.

How to Invest in Banking Stocks?

There are multiple options for investors looking to invest in banking stocks in India. These include buying individual shares of banks, investing in banking ETFs or mutual funds, utilising banking-specific portfolio management services (PMS), exploring structured products associated with banks, or selecting bank-issued fixed deposits and bonds for a stable income with reduced risk. Therefore, the selection of the most suitable banking stocks in India should be based on your risk tolerance and investment goals. Exploring the banking shares list helps investors make informed decisions.

What is Bank NIFTY?

Bank NIFTY, alternatively referred to as the Bank index, is a stock market indicator monitoring the top banking stocks' performance in India. It is part of the broader NIFTY 50 index. The Bank NIFTY index, also known as Fininifty or Nifty Financial Services, serves for evaluating the banking sector's performance in India.

This index is closely monitored by both institutional and individual investors and can be utilised for the overall economic condition of India.12 of the most highly traded and large-cap banking stocks are traded on the National Stock Exchange. The Bank NIFTY index provides insight into the banking sector's dynamics and market sentiment.

How Does NIFTY Bank Work?

Nifty Bank is an index in India that monitors the performance of banking shares. It follows a marketplace capitalization method, where the significance of every inventory is determined by way of its free float marketplace capitalisation. This implies that companies with higher market capitalization and a larger number of tradable shares have greater importance in the index.

How NIFTY Bank is Calculated?

The Nifty Bank index is computed using the method of free-float market capitalisation. To determine the weight of each stock in the index, the market capitalization of every stock is adjusted by the free-float factor.

The formula for calculating the Nifty Bank index is:

Nifty Bank Index = (Sum of Free Float Market Capitalization of all stocks in the index) / Base Market Capitalization x 100- H3

In this formula, the base market capitalization refers to the index's market capitalization on the base date, set as January 1, 2000, with a base value of 1000 points.

Advantages of Investing in Banking Stocks

Here are the advantages of investing in top banking sector stocks:

  1. Consistent and Dependable Dividends

    Many banks have a history of delivering dependable cash payouts to holders. This ensures that they can be profitable investments for individuals wanting a stable source of money. Banks operate based on predictable cash inflows from different loans and investments, enabling them to maintain payments overtime
  2. Potential for Long-Term Growth

    The banking sector offers prospects for long-term expansion. Banks stand to benefit from the economic growth of the countries or regions where they operate. By expanding their loan portfolios and introducing new financial services, banks can enhance their profitability over time.
  3. Defensive Attributes During Economic Downturns

    Even though bank stocks may exhibit short-term vulnerability during an economic decline, they are generally more resilient to market volatility and other sectors due to their largely stable business and dividend regularity.
  4. Exposure to Diverse companies and Industries

    While banks offer financing services to a greater number of businesses and individuals, they cut across multiple sectors and industries. This ensures that the investor has a stake across diversified businesses and sectors. Therefore, the investor’s portfolio of investment will not be entirely at risk.

Investing in top banking stocks in India presents an opportunity for you to diversify your portfolio and is a reliable long-term portfolio management strategy through which you will have an opportunity to leverage the banking sector’s growth and consistent dividends.

Prior to investing, it's crucial to thoroughly analyse the risks and factors unique to the banking stocks under consideration. Now you can do this analysis with the help of BlinkX online trading app. It helps Investors track market movements and manage their portfolios.

FAQs on Banking Stocks In India

Identifying the best banking stocks entails thoroughly researching elements such as the bank’s financial performance, asset quality, and management quality, market position, and regulatory environment.

Dissimilar risks involved with investing in financial institutions are exposure to economic downturns, regulatory modifications, credit risk, interest rate risk, market volatility, competition, and operational risks since frauds or cyber attacks may occur.

Investors generally evaluate the dividend yield while buying banking stocks because it represents the return on investment concerned with dividend payments. 

Risks correlated with small or mid-sized banking stock investment include additional volatility, lower liquidity, greater credit risk potential.

Yes, banking stocks in India are sensitive to changes in interest rates, as they impact borrowing costs, loan demand and profitability for banks.