Best Banking Stocks in India (2024): Bank Nifty, Meaning, Benefits & More
The banking sector is an essential part of any economy and plays a critical role in the functioning of the stock market and the overall economy. Banking stocks in India greatly interest investors due to their potential for long-term growth and steady dividend income.
In this blog, we’ll explore the nuances of bank sector stocks, including what they are, the best bank stocks to buy for the long term, and the factors you should consider while investing in them. Moreover, we will also highlight the best bank stocks to buy in 2024. This will also include the top banking sector smallcases for you to consider.
List of Top Banking Stocks in India (2024)
Here is a list of the top Indian private and public sector banking stocks:
| Company Name | Sub Sector | Market Cap (Rs. in Cr) | Close Price (in Rs.) | PE Ratio | 5Y CAGR | Net Profit Margin | Total Deposits-Banks |
|---|---|---|---|---|---|---|---|
| Kotak Mahindra Bank Ltd | Private Banks | 365,754.44 | 1,871.95 | 20.08 | 5.20 | 19.32 | 445268.76 |
| Axis Bank Ltd | Private Banks | 383,678.82 | 1,242.70 | 14.54 | 14.26 | 19.12 | 1067102.40 |
| ICICI Bank Ltd | Private Banks | 907,662.53 | 1,292.00 | 20.51 | 27.29 | 18.75 | 1443579.95 |
| HDFC Bank Ltd | Private Banks | 1,292,493.01 | 1,708.50 | 20.18 | 9.18 | 15.70 | 2376887.28 |
| Bank of Baroda Ltd | Public Banks | 123,026.71 | 235.85 | 6.56 | 20.05 | 13.24 | 1351801.84 |
| Indian Bank | Public Banks | 68,028.42 | 509.30 | 8.08 | 27.12 | 13.11 | 687953.07 |
| Union Bank of India Ltd | Public Banks | 93,885.77 | 122.62 | 6.80 | 17.18 | 11.67 | 1224593.36 |
| State Bank of India | Public Banks | 707,498.65 | 789.95 | 10.55 | 23.58 | 11.28 | 4966537.49 |
| Canara Bank Ltd | Public Banks | 95,650.02 | 104.71 | 6.26 | 22.49 | 10.98 | 1312242.47 |
| Bank of India Ltd | Public Banks | 50,425.35 | 110.00 | 7.68 | 11.65 | 9.73 | 740611.44 |
Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Note: The data on this list is from 19th September 2024, and the data is derived from the Tickertape Stock Screener.
- Sector > Financials > Public Banks & Private Banks
- 5Y CAGR: Set the lower limit to zero (positive)
- Net Profit Margin: Set the lower limit to zero (positive) – Sort from highest to lowest
- Total Deposits (Cr): Set to High
🚀 Pro Tip: You can use Tickertape’s Stock Screener to research and evaluate stocks with over 200+ filters and parameters.
Best Banking Stocks in India
Let’s look at the top 10 bank stocks in India in detail.
Kotak Mahindra Bank Ltd
Kotak Mahindra Bank is one of the leading private-sector banks in India. It was founded in 2003. The bank offers a wide range of banking products and services for retail and corporate customers, including accounts, loans, cards, investment services, insurance and asset management. Over the last 5 years, the company’s current ratio has been 17.05, higher than the industry average of 11.85.
Axis Bank Ltd
Axis Bank is one of India’s top private banking shares. It is renowned for its innovative financial solutions and customer-focused approach. Thus, with a comprehensive suite of banking services, it stands out as a dynamic player in India’s rapidly evolving financial sector. Over the last 5 years, the bank’s net income has grown at a yearly rate of 39.26%, higher than the industry average of 31.67%, and its current ratio has been 12.08, also higher than the industry average of 11.85%.
ICICI Bank Ltd
ICICI Bank is recognised for its innovative banking solutions and diverse financial offerings, catering to retail and corporate clients. As of 19th September 2024, the company had a market capitalisation of Rs. 907,662.53 cr., and its share price closed at Rs. 1,292. Over the last 5 years, the bank’s net income has grown at a yearly rate of 59.75%, higher than the industry average of 31.67%, and its current ratio has been 14.13, also higher than the industry average of 11.85%.
HDFC Bank Ltd
HDFC Bank is one of India’s largest private sector banks, and it is known for its extensive branch network. It offers a wide range of financial products and services. As of 19th September 2024, the bank had a market capitalisation of Rs. 1,292,493.01 cr., and its share price closed at Rs. 1,708.50 cr. Over the last 5 years, the bank’s revenue has grown at a yearly rate of 26.87%, higher than the industry average of 17.21%, and its market share increased from 24.06% to 35.37%.
Bank of Baroda Ltd
Bank of Baroda Ltd is a leading Indian public sector bank known for its extensive banking services, which include retail, corporate, and international banking. Thus, with a robust presence and a customer-centric approach, it plays a pivotal role in the country’s financial landscape. Over the last 5 years, the company’s revenue has grown at a yearly rate of 18.45%, higher than the industry average of 14.77%, and its market share increased from 9.18% to 10.32%.
Indian Bank
As one of the best finance stocks in India for the long term, Indian Bank demonstrates a solid commitment to customer service and financial inclusion, making it a prominent public sector bank. It offers various banking products and services, contributing significantly to India’s economic growth and development. Over the last 5 years, the company’s revenue has grown at a yearly rate of 24.97%, higher than the industry average of 14.77%, and its market share increased from 3.18% to 4.68%.
Union Bank of India Ltd
Union Bank of India is a prominent public sector bank that delivers a broad spectrum of financial services to diverse customer segments. Thus, its strategic initiatives and customer-centric approach position it as a key contributor to the nation’s banking sector stocks. Over the last 5 years, the company’s revenue has grown at a yearly rate of 24.6%, higher than the industry average of 14.77%, and its market share increased from 5.94% to 8.6%.
State Bank of India
SBI is India’s largest public sector bank. It serves a vast customer base with an extensive network of branches and ATMs. Thus, considered one of the best bank shares to buy in India, it offers a comprehensive suite, including savings accounts, loans, and other investments in the banking sector. As of 19th September 2024, the bank had a market capitalisation of Rs. 707,498.65 cr., and its share price closed at Rs. 789.95.
Canara Bank Ltd
Its widespread network and diverse banking offerings make Canara Bank, a leading public sector bank, well-known. Therefore, committed to financial inclusion, this can be one of the best bank stock in India across the country. Over the last 5 years, the company’s revenue has grown at a yearly rate of 19.19%, higher than the industry average of 14.77%, and its market share increased from 8.74% to 10.13%.
Bank of India Ltd
Bank of India is a well-established public sector bank in the banking sector share list with a rich history and a comprehensive range of banking products and services. Thus, it continues to be a trusted financial partner, contributing to the economic progress of the top 10 bank stocks in India for long term. Over the last 5 years, the company’s current ratio has been 14.81, higher than the industry average of 10.18.
Top Banking Sector smallcases
House of HDFC
The House of HDFC smallcase includes the stocks of companies that are subsidiaries of HDFC Group, one of India’s largest financial conglomerates. It was created by Windmill Capital.
The smallcase provides exposes investors to a diversified range of HDFC Group companies. These companies have a strong presence in India’s financial services industry. Furthermore, it provides investors with a long-term investment opportunity, as the companies included in the smallcase have a strong track record of growth and profitability.
Disclosures for House of HDFC smallcase
Banking and Finance
The Banking and Finance smallcase is a basket of handpicked stocks of banks and financial institutions listed in India. It was created by Angel One.
This smallcase is designed to provide investors with exposure to the banking and financial services sector. The presence of NIFTY Banks provides exposure to the top banks of India. At the same time, NIFTY financial services provide exposure to the top financial companies of the country.
Disclosures for Bank & Finance smallcase
Banking Tracker
The Banking Tracker smallcase consists of companies that track the performance of the banking industry in India. It was created by Windmill Capital.
This smallcase includes some of the most prominent banking and financial services companies listed on the Indian stock exchanges. The Banking Tracker smallcase is designed to provide investors with a diversified portfolio of banking stocks. Thus, it can help to mitigate the risk associated with investing in a single stock or a narrow group of stocks.
Disclosures for Banking Tracker smallcase
However, if you’re confused about which stocks to pick, you can explore smallcases:
- smallcases are readymade portfolios of stocks/ETFs, that are based on a theme idea or strategy
- They’re created and managed by SEBI-registered experts
- smallcase.com offers over 200+ stock portfolios, created by 180+ managers
- Some of the popular smallcases among new investors are as follows:
Disclosures for aforementioned smallcases
What are Banking Stocks?
Bank sector stocks are bank shares to buy of companies that provide financial services, such as commercial banks, investment banks, and insurance companies
These leading private sector banks in India provide financial services such as deposits, loans, and investment services to their customers. The overall health of the economy and the stock market closely influences the performance of the best banking stocks in India. The finance sector stocks include small-cap bank stocks, mid-cap bank stocks, and large-cap bank stocks. Therefore, the banking sector stocks play a critical role in providing liquidity to businesses and individuals.
Banking Sector in India – Overview
In India, the banking sector is dominated by public, private, and foreign banks stocks. However, the best bank to invest in India in the banking sector has a crucial role in the Indian economy, accounting for a significant portion of the GDP and providing crucial financing and lending services to businesses and individuals.
The bank sector stocks belong to the best banks to invest in India and have long been a reliable source of long-term growth and income for investors. However, recent trends and developments, such as the rise of fintech companies, have changed how traditional banking business models operate.
Nevertheless, the banking stocks in India have remained resilient and have adapted to these changes to continue to provide value to investors.
How to Identify the Best Banking Stocks to Buy in India?
Identifying the best banking stocks in India based on common ratios requires a multi-faceted approach, considering various ratios and evaluating them alongside other factors. Therefore, here’s how you can analyse banking stocks using these ratios:
Price-to-Earnings (P/E) Ratio
- Compare the P/E ratio to the bank’s historical average and industry peers. A lower P/E ratio may indicate potential undervaluation.
- Consider the bank’s growth prospects. Hence, a higher P/E ratio can demonstrate high growth potential.
Price-to-Book (P/B) Ratio
- Look for banks with a P/B ratio below 1.0. This suggests the stock might be undervalued compared to its book value.
- Beware of banks with very low P/B ratios, which could indicate potential problems.
Efficiency Ratio
- A lower efficiency ratio indicates better operational efficiency and profitability. Therefore, banks should aim for an efficiency ratio below 60%.
- Compare the efficiency ratio to the industry average and the banks performance historically.
Loan-to-Deposit Ratio (LDR)
- An LDR between 70% and 85% is generally considered healthy. This indicates that the bank is effectively using its deposits for lending and income generation.
- Avoid banks with very high LDRs, which can signify excessive risk exposure.
Capital Ratios
- Analyse key capital ratios such as the Tier 1 Capital Ratio and Total Capital Ratio. These ratios measure a bank’s ability to absorb losses.
Who Should Invest in the Bank Sector?
Investors seeking exposure to the financial sector and a stable income stream through dividends may consider investing in the best stocks in the financial sector in India. However, it is crucial to thoroughly analyse individual banks’ financial health, risk management practices, and regulatory compliance before investing. A comprehensive evaluation of these factors helps identify banking institutions that align with an investor’s risk appetite and return expectations while mitigating potential pitfalls in the ever-evolving financial landscape.
How to Invest in Banking Stocks?
Various avenues allow investors to invest in banking stocks in India. You can buy individual bank shares, invest in banking ETFs or mutual funds, consider banking-specific portfolio management services (PMS), explore structured products linked to banks, or opt for bank-issued fixed deposits and bonds for a fixed income with lower risk. Thus, choose the best banking stocks in India based on your risk tolerance and investment objectives. However, as mentioned earlier, you can also consider smallcase for your banking sector investments!
What is Bank NIFTY?
Bank NIFTY is a stock market index that tracks the performance of the top banking stocks in India. It is also known as the Bank index and is a subset of the larger NIFTY 50 index. The Bank NIFTY index or Fininifty (also called Nifty Financial Services) can provide investors with a benchmark for measuring the performance of the banking sector in India. Institutional and retail investors widely follow it. It can be used as a proxy for the overall health of the Indian economy.
The Bank NIFTY index includes 12 of India’s most liquid and large-cap banking stocks listed on the National Stock Exchange (NSE).
You can check out the Bank NIFTY stocks list in the table below:
| Company Name | Close Price | Market Cap (Rs. in Cr.) |
|---|---|---|
| AU Small Finance Bank Ltd | ₹752.50 | ₹55,942 |
| Axis Bank Ltd | ₹1,242.70 | ₹3,84,374 |
| Bandhan Bank Ltd | ₹211.35 | ₹34,047 |
| Bank of Baroda Ltd | ₹235.85 | ₹1,21,966 |
| Federal Bank Ltd | ₹189.00 | ₹45,635 |
| HDFC Bank Ltd | ₹1,716.50 | ₹13,03,351 |
| ICICI Bank Ltd | ₹1,295.00 | ₹9,10,234 |
| IDFC First Bank Ltd | ₹74.55 | ₹55,237 |
| IndusInd Bank Ltd | ₹1,488.00 | ₹1,15,660 |
| Kotak Mahindra Bank Ltd | ₹1,874.00 | ₹3,72,166 |
| Punjab National Bank | ₹108.00 | ₹1,18,093 |
| State Bank of India | ₹794.85 | ₹7,04,999 |
Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Note: The data on the top banking stocks India in the list is from 19th September 2024. The data is derived from the Tickertape Stock Screener.
How Does NIFTY Bank Work?
Nifty Bank is a market capitalisation-weighted index that tracks the performance of banking stocks in India. It operates based on a free-float market capitalisation-weighted methodology. The index’s free-float market capitalisation determines the weight of each stock. Therefore, the more valuable a company is in market capitalisation and the more shares it has available for trading, the higher its weight in the index.
How NIFTY Bank is Calculated?
The index is calculated using the free-float market capitalisation method. The market capitalisation of each constituent stock is potentially multiplied by its free-float factor to determine its weight in the index.
The formula for calculating the Nifty Bank index is as follows:
Nifty Bank Index = (Sum of Free Float Market Capitalisation of all stocks in the index) / Base Market Capitalisation x 100
Note: Here, the base market capitalisation is the market capitalisation of the index on the base date, which is January 1, 2000, with a base value of 1000 points.
Advantages of Investing in Banking Stocks
Here are some of the benefits of investing in the best banking sector stocks.
Steady and Reliable Dividends
Many banks have a history of paying steady dividends to their shareholders, making them attractive investments for those seeking a source of regular income. Banks typically have predictable cash flows from their lending and investment activities, which may allow them to maintain consistent dividend payouts over time.
Potential for Long-Term Growth
The banking sector can provide opportunities for long-term growth. Banks have the potential to benefit from the economic development of the countries or regions in which they operate. Expanding their loan portfolios and introducing new financial services to customers can enable banks to boost their profits.
Defensive Characteristics During Economic Downturns
Typically, investors consider bank shares defensive because of their stable business models and reliable dividends. Although bank stocks may experience short-term volatility during economic downturns, they generally withstand market fluctuations better than other sectors.
Exposure to Various Businesses and Industries
Banks provide financing services to businesses and individuals across various industries. This may allow investors to gain exposure to a diverse range of businesses and sectors, which can reduce the overall risk of an investment portfolio. The performance of bank stocks in India may be less impacted by the performance of any particular industry or sector.
Challenges Faced by the Banking Sector in India
Regulatory Changes
Banks must navigate complex regulations, from anti-money laundering (AML) rules to data protection laws. Staying compliant can be costly and time-consuming, affecting profitability. To manage this, many banks are automating compliance processes using technology, helping them keep up with changing regulations.
Cybersecurity Risks
With digitalisation comes a heightened risk of cyber attacks. Banks must invest heavily in cybersecurity to safeguard customer data and prevent fraud. Many banks now collaborate with cybersecurity firms and offer employee training to enhance their defences.
Increasing Competition
The rise of fintech and digital banks has intensified competition. To keep up, traditional banks are adopting digital solutions and partnering with fintech firms, exploring new business models like open banking to remain competitive. However even the best bank shares to buy today is faced with this increased competition.
Economic Uncertainty
Economic instability, driven by factors like political tensions, can reduce demand for financial services. To counter this, banks are diversifying their portfolios and using technology to better assess risks and make informed decisions. Even the best bank stocks to buy in India are susceptible to economic uncertainty and market downturns.
Fintech Disruption
Fintech companies offer faster, cheaper services, disrupting traditional banking models. In response, banks are increasing investments in technology and forming partnerships with fintech firms to stay competitive.
Talent Management
The evolving banking landscape requires a workforce skilled in technology, regulation, and customer service. Banks are investing in employee training and development to ensure their teams remain equipped to handle new challenges.
Factors to Consider While Investing in Banking Stocks
There are a few factors that you should consider while investing in the best banking share to buy.
Regulatory Risks and Compliance Issues
Changes to these regulations can impact the profitability of the banking sector stocks in India. Hence, as an investor, you should be aware of the regulatory risks while investing in the best bank shares to buy now.
Credit Risk and Loan Quality
Banks earn revenue by lending money to individuals and businesses, and the quality of these loans can impact their profitability. Therefore, before investing, consider the quality of the best bank stocks in India loan portfolio, including its level of non-performing loans and its underwriting practices.
Interest Rate Risk
Changes in interest rates can impact the profitability of the best bank shares, as banks earn revenue by charging interest on loans and paying interest on deposits. Hence, as an investor, you should consider the bank’s sensitivity to interest rate changes when it comes to investing in the best banking share to buy. Additionally, understand how they may impact the profitability of the best stock in the banking sector.
Technological Disruption and Cybersecurity Threats
The best bank shares to buy are increasingly reliant on technology, and the emergence of new technologies and cybersecurity threats can impact bank share prices and profitability. Hence, consider the bank’s technological capabilities and ability to manage cybersecurity risks before investing.
Government Policies and Regulations
Government policies and regulations, including changes to tax laws, capital requirements, and monetary policy, can impact the top Indian banks. Therefore, be aware of the potential impact of these policies on the best bank share to buy in the banking sector.
Competition and Industry Dynamics
The banking sector is highly competitive, and India’s emergence of the best bank stocks list has changed the industry dynamics. These banking stocks can impact profitability and bank share prices. Hence, keep a close eye on the bank’s competitive position to understand which bank stock is best to buy in India.
To Wrap It Up…
One could benefit from the banking sector’s long-term growth and steady dividend income. However, it’s important to consider the risks and factors specific to the banking stocks to buy before investing. Moreover, with investment platforms like smallcase, you can build a low-cost, diversified portfolio instantly. So, what are you waiting for? Download the smallcase app today and begin your investment journey!
As always, please do your own research and/or consult a financial advisor before investing in the best banking share to buy in India.
Frequently Asked Questions on Banking Stocks in India
Here are the top 5 bank stocks in India from our list of top 10 banking stocks in India:
-Kotak Mahindra Bank Ltd
-Axis Bank Ltd
-ICICI Bank Ltd
-HDFC Bank Ltd
-Bank of Baroda Ltd
Note: The data on this list of top 5 banking stocks in India was taken on 19th September 2024.
You can invest in the best banking shares to buy by following these steps:
(a) Research the different banking stocks in India that are available.
(b) Choose a reputable broker to help you buy and sell stocks.
(c) Invest in the best bank stocks to buy long-term.
The consistent growth of the Indian economy has led to an increase in demand for banking services. However, it’s important to do your own research and/or consult a financial advisor before investing in the best banking stocks in India.
Public sector banks have reported a higher net profit in the financial year 2024-25, and this is due to the one-time provision allocated to pensions by several banks. This pension provision being lower than anticipated, gave way to a rise in their stock prices.
It can be possible to experience stability, growth potential, and potential for high returns by investing in Bank Nifty. However, the maximum duration for holding a derivative contract is restricted to three expiry months. Investors should comprehend the growth potential and challenges confronted by the these banks before investing.
Discover Other Collections:
Keep yourself informed and up-to-date on a variety of thematic sectors by reading the articles below:
