ICICI Bank: Unwarranted Beating, Proven Growth Prospects

Sector Analysis: ICICI Bank (IBN) is India’s largest private sector bank - it belongs to the International Banking group. Oflately, fortunes of international banks have been tied to the US financial sector; IBN’s correlation to Financials SPDR (XLF) in the past six months is 0.86. In simple terms, IBN traded in-line with the US financial sector for the past six months and dropped by 50%; underperforming India’s BSE Sensex which fell by 15% during the same period.

There are many reasons for IBN’s decline but a major influence has been the issues facing the US banking sector. So, the obvious question that investors have regarding banking stocks is: “what if the story of US banks' asset write downs and earnings losses is repeated in emerging markets such as India?” However, there are a few subtle differences between Indian banks and their US counterparts that make Indian banks less likely to follow the same path.