Should you invest in the Nifty Private Bank ETF to gain exposure to the banking sector?

The modest recovery in credit growth, improving asset quality trends, lower credit costs across all sectors and improving loan growth contributed to the performance of the banking sector which recorded further earnings growth in Q4FY22.

Chintan Haria, Head of Product Development and Strategy, ICICI Prudential AMC, said: “Higher rates, relatively inexpensive valuations, significantly improved asset quality, moderation in the cost of credit and NPAs will be positive for banks.

Bank Nifty has outperformed Nifty and Nifty Bank TRI has outperformed both Nifty 50 TRI and Nifty 500 TRI 6 out of 10 years. Growing labor force and growth in disposable income industry experts say will and will help improve demand for banking services.

“The Indian banking sector harbors huge potential for growth given the strong demand for its services, constant innovation in terms of improving operational efficiency as well as improving business fundamentals through various reforms in this space. and investors should consider investing in the Nifty Private Bank ETF to gain exposure to the banking sector,” says Haria.

Private Bank ETFs

The banking sector plays an important role in the economic reconstruction and growth of a country. It not only bridges the funding gap in the country, but also provides a range of other services to retail customers. These include providing different types of accounts and expanding the option to invest and generate returns through their investment products.

Haria points out, “India is on track to achieve its ambitious goal of becoming a $5 trillion economy by 2025 and the banking sector is likely to play an important role in enabling this growth. More so, as the economy grows, the banking sector will also experience growth.

Bet on the banks

For India’s banking sector, experts say the environment is slowly but surely becoming conducive to growth. In the aftermath of the global financial crisis, Indian banks struggled with defaults and an increase in non-performing assets (NPAs). However, Haria explains, “With NPAs steadily declining, new opportunities are being created due to improved credit growth and corporate profitability. Against the backdrop of such a landscape, private banks, in particular, have become a unmissable long-term investment opportunity.

However, it is important to note that even though the banking sector is set to grow, you will still need to select the best private banks to exploit this opportunity optimally. “Since stock picking is a time-consuming and research-intensive process, why not let the professionals help you out here? One of the easiest ways to solve this dilemma is to invest in a Nifty ETF Private Bank,” adds Haria.

Private Bank ETFs

This ETF by replicating the Nifty Private Bank Index, according to experts, will invest in the top 10 names in the private banking space. Therefore, an investor will not only gain the desired exposure to private sector banks, but also will not have to worry about stock selection or active portfolio management. Currently, the index includes names such as HDFC Bank, ICICI Bank, Kotak Bank and Axis Bank.

“It goes without saying that as the Indian economy improves, the bank has everything to gain and one of the easiest ways to reap this gain may be to invest in ETF programs of private banks. Remember, investing should be aligned with your overall equity and asset allocation strategy,” concludes Haria.