Banks in the Limelight

As a result of optimistic economic data, the Indian headline indices BSE Sensex and Nifty 50 surged 1 per cent over the course of a fortnight. Broader indices lagged behind the main indices, ending the fortnight about 0.5 per cent higher. The wholesale price-based inflation figure fell below a double-digit mark for the first time in 19 months and is the lowest since March 2021. According to data issued by the Ministry of Commerce and Industry, wholesale inflation declined to 8.39 per cent in October from 10.70 per cent in September, driven by a decline in commodity prices. 

After reaching a five-month high of 7.41 per cent in September, retail inflation fell to 6.77 per cent in October, primarily as a result of falling food basket prices. According to data issued by Ministry of Statistics and Programme Implementation, the Index of Industrial Production (IIP) showed that India’s industrial growth grew 3.1 per cent in September. The Reserve Bank of India said that for the week ending November 12, India’s foreign exchange reserves fell by USD 1.08 billion to USD 529.99 billion. 

Banking sector stocks experienced a significant upswing, making BSE Bankex the top-performing sector over the past two weeks with gains of about 2 per cent. The economic recovery in the banking industry is promoting asset quality improvements and a decline in nonperforming assets (NPAs), while improved balance-sheets and higher demand are driving up bank loan growth. According to a report by CRISIL, bank credit is expected to grow by 15 per cent annually in the fiscal years 2023 and 2024.

In other developments, Sberbank and VTB Bank, Russia’s largest and second largest banks, are the first foreign lenders to be approved to facilitate overseas trade in rupee. Moreover, the Reserve Bank of India (RBI) authorised HDFC Bank and Canara Bank to establish a separate ‘vostro account’ for rupee transactions with Russia. The power sector, one of the gaining sectors in 2022, witnessed a significant fall due to several sectoral concerns. Adani Power was the worst-performing stock, losing almost 10 per cent.

This caused the BSE Power index to tumble 4.78 per cent over the fortnight. With losses of roughly 2 per cent, BSE Metals was also among the top losing sectors as base metal prices slumped due to worries about global demand. The two stocks that mostly caused the metal index to fall were Hindalco Industries and Steel Authority of India. While DIIs were the net buyers over the past two weeks, FIIs have turned to being net sellers. The FII outflow was recorded at Rs 1,131.26 crore whereas DII inflow was recorded at  ₹4,056.44 crore in the past 15 days.

Economic recovery in the banking industry is promoting asset quality improvements and a decline in non-performing assets while improved balance-sheets and higher demand are driving up bank loan growth