How long will the Cinderella times last for banks?

The Indian banking sector in Q4FY23 performed well, with strong credit growth and pristine asset quality resulting in higher margins. However, pressure on Net Interest Margins (NIMs) is expected due to slower deposit growth and a pause in repo rate hikes. The Bank Nifty has fallen by 0.8% YTD, while the share of unsecured loans across banks increased by 300 basis points since June 2020, which might aid margins in the near term. Despite being in one of its best shapes in a decade, valuations of private banks still trade near their historically low valuations. Technical indicators suggest a positive long-term outlook for the sector.