Why ICICI Bank shares rallied over 5% to hit a new lifetime high—explained with 5 key reasons

Despite a slow start to Monday's trading session, ICICI Bank shares gained momentum in the subsequent hours and continued their upward trajectory until the closing bell, setting multiple milestones.

The shares of the nation's second largest bank by m-cap surged by 5.1% during intraday trade and touched a historic peak of ₹1,163 per share before finishing the trade with a gain of 4.72%. Impressively, the shares have sustained a bullish trend for the past six consecutive months, including April, resulting in a notable gain of 26.3%.

This outstanding performance has propelled the bank's market capitalisation to surpass ₹8 lakh crore for the first time in today's trade, making it the fourth listed company to achieve this milestone.

Taking the stock's all-time high price into account, the bank's m-cap touched ₹8.16 lakh crore.

Moreover, today's surge in bank shares propelled the Nifty Bank to reach a fresh all-time high, accounting for 80% of the overall gain in the index for the day.

Also Read: HDFC Bank vs ICICI Bank vs Axis Bank: Which stock to buy after Q4 results?

The following are five key factors why bank shares skyrocketed in today's trade: 

Also Read: Axis Bank share price hits lifetime high after Q4 results 2024. More steam left?

In-line performance: The bank showcased an in-line performance in the fourth quarter of fiscal year 2024 (4QFY24), recording a 17% year-on-year (YoY) increase in net earnings. This growth was fueled by a strong expansion in net interest income (NII), disciplined management of operating expenses, and prudent handling of credit costs.

Notably, the bank achieved an annualised Return on Assets (ROA) of 2.4% and a Return on Equity (RoE) of 18.5%. For the full fiscal year FY24, profit after tax (PAT) surged to ₹408.9 billion, representing a notable 28.2% YoY increase.

Additionally, the bank's net interest margin (NIM) witnessed an 8% YoY growth, supported by a robust 16.2% YoY (2.7% quarter-on-quarter, QoQ) expansion in loans. However, NIMs experienced a slight moderation by 3 basis points (bp) QoQ, settling at 4.40%.

Also Read: ICICI Bank: Brokerages remain bullish on stock post Q4 earnings; raise target price

Regarding business expansion, advances grew by 16.2% YoY (2.7% QoQ), primarily driven by growth in retail, business banking (BB), and small and medium-sized enterprise (SME) loans. Within the retail segment, notable growth was observed in housing, rural, and unsecured credit (personal loans and credit cards), as highlighted by Motilal Oswal.

Positive outlook: After reporting in-line performance, brokerage firms have expressed optimism regarding the stock's future performance. JM Financial has affirmed its 'Buy' rating and a target price of ₹1,330.

Systematix Institutional Equities also maintains a 'Buy' rating and has raised its target price to ₹1,275 per share. Antique Stock Broking, too, has retained its 'Buy' rating and revised the target price upwards to ₹1,300 per share. 

Similarly, CLSA has sustained its 'Buy' rating, elevating the target price to ₹1,350 per share. JP Morgan remains 'Overweight' on ICICI Bank with a target price of Rs1,300, while Nomura has maintained its 'Buy' rating with a target price of Rs1,335 per share.

Global optimism: In addition to company-specific factors, positive global cues have significantly buoyed investor sentiment, propelling market indices upwards. Notably, U.S. markets concluded last week with their most robust performance in 2024. 

This surge was fueled by the stellar earnings of tech giants such as Alphabet and Microsoft. The S&P and Nasdaq indices recorded their best weekly gains since November.

Encouraging developments in the Middle East: The surge in buying activity finds further support from recent positive developments unfolding in the Middle East. According to a report by Bloomberg, U.S. Secretary of State Antony Blinken is intensifying efforts to broker a truce in Gaza. 

Also Read: OPEC cuts and geopolitical tensions propel Brent crude up by over 13% in 2024

Scheduled meetings in the Middle East on Monday aim to provide a final opportunity to persuade Israel to halt an impending attack on Rafah. Following this development, crude oil prices during Monday's trade tumbled by 0.8%. 

Market defies rate cut concerns: The market defies the probability of a rate cut by the U.S. Fed being postponed to the second half of this year, given the slowing growth in Q1FY24 and sticky inflation.

Also Read Wall Street week ahead: All eyes on Federal Reserve’s interest rate decision and jobs data

The U.S. Gross Domestic Product (GDP), a comprehensive gauge of goods and services produced from January to March, expanded at a 1.6% annualised rate, falling short of the 2.4% forecast. While the core Personal Consumption Expenditures (PCE) price index, excluding food and energy, rose by 2.8% year-on-year in March, maintaining the same level as February and slightly surpassing expectations.

Also Read: US Fed meet ahead: What do dimming rate cut hopes mean for Indian stock market?

The persistent inflationary figures have raised concerns that the Federal Reserve might need to prolong elevated interest rates or even consider rate hikes in the future. 

With the Fed set to announce its interest rate decision on Wednesday, investors are closely awaiting Chair Powell's statements for insights into the anticipated timing and frequency of interest rate adjustments projected for the year, especially amidst ongoing inflationary pressures.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.