Banking Sector takes the Breath Away

Just as the global economic scenario seemed to be returning to normal in the wake of the receding scare of the pandemic, March 2023 decided to give things a bit of shake, rattle and roll. This was primarily on account of the fallout of Silicon Valley Bank (SVB), a steady bank in many ways that went bust in hours not because of bad lending but because of investing in US’ treasuries – something considered a safe investment! The same month also saw a 150+ years’ old Swiss Bank collapse, creating fissures in the banking sector across developed economies. Yet, after the end of such a dismal month and quarter, the bulls are looking to regain control of the market.

In the last two weeks we have observed a change in the sentiment of investors across the board with most sectoral indices experiencing gains. After recording negative returns over the past four months in a row, for the first time in two decades frontline equity indices are showing signs of revival and April may bring some respite for the bulls. There are a few factors that are pointing towards it. First, with companies crossing their 200-day moving average and 20-day moving average, there appears to be a positive tilt. It is on a rise and currently around 200 stocks are trading above their 200-day moving average.

Another important market indicator turning positive is the number of companies hitting their 52-week high. Last week, for every two companies touching 52-week low there were three companies touching their 52-week high. All this points to the building up of a bullish sentiment and investors are now taking bets on the optimistic side. What is also heartening to note is that banking stocks have once again started to outperform. Last week, Nifty Bank comfortably outperformed Nifty 50. This outperformance was against the backdrop of two important events, mentioned earlier, that had the potential to derail banks in India.

Nevertheless, Indian banks were able to sail through this rough phase and are on track of giving a third year of positive returns in a row. In our cover story we have deep-dived into the banking sector and whether it is safe to invest in them now. The cover story also highlights what is happening in the banking system in the developed world. For the special story in this issue, we have analysed the prospects of the infrastructure sector in India, a sector where the current action is. Going forward, the recent decision by OPEC to cut oil production has added to the woes of the US’ Federal Reserve, which is struggling to keep inflation at manageable levels.

The IPO markets in FY23 are being a victim of such unsettled market sentiments and global uncertainty with the average run rate of IPOs plummeting. It will be interesting to see how the primary market shapes up in FY24. Nifty has been one of the worst performing indices in 2023 amongst the larger economies. There is a very good chance that the Indian markets will catch up with the global markets in the coming quarters. BSE Sensex is up by 2.75 per cent since March 24. However, recovery in the broader markets is sharper and has ensured decent recovery in the portfolios of investors. For investors, it is that time of the season in the equity markets when one can take risk and increase allocation to equity with a long-term investment horizon.

RAJESH V PADODE
Managing Director & Editor