Banks Lead The Rally

Throughout the fortnight Indian benchmark indices experienced a mixed bag of gains and losses, but the last trading session of the financial year helped the indices soar high and record substantial gains for the period. As a result, the BSE Sensex surged 2.36 per cent during the period while the Nifty 50 index climbed 2.19 per cent, owing primarily to robust gains in the banking sector. The shares of IndusInd Bank and Bank of Baroda led the banking rally with gains of over 6 per cent each while BSE Bankex stood out as the best-performing sector, gaining more than 3 per cent as concerns about the global banking system eased.

Furthermore, as the government has eliminated the indexation tax benefit for investments in long-term debt mutual funds, banks are expected to receive more deposits in the coming years. Broader indices lagged behind the main indices with the BSE Mid-Cap index and the BSE Small-Cap index ending the fortnight merely 0.94 and 0.21 per cent higher, respectively. Diagnostic and hospital-related stocks once again came into the spotlight as the number of corona virus cases in the country surged and the BSE Healthcare index emerged as one of the Top Gainers. Fast moving consumer goods and automotive sector stocks experienced a modest rally, whereas majority stocks in the power and oil and gas sectors witnessed intense selling pressure. 

After a report by The Ken raised doubts about whether the group has actually repaid the USD 2.15 billion in debt, Adani Group stocks, which had earlier started to rise after a sharp decline, fell once again as a result of the heavy selloff. BSE Realty continued to perform badly, suffering losses of 1.83 per cent. Shares of Macrotech Developers (Lodha) recorded gains of around 8 per cent but the index was severely dragged down by significant losses from several constituents, most notably Sobha Ltd. and Indiabulls Real Estate Ltd. The Ministry of Finance said that the Indian economy is predicted to grow by 7 per cent in FY23.

This is despite global headwinds and retail inflation predicted to moderate in line with wholesale inflation, which dropped to a 25-month low in January. Additionally, the Reserve Bank of India (RBI) bulletin stated that if the country is successful in controlling the El Nino event effectively, retail inflation will closely range between 5 per cent and 5.6 per cent. In the week ended March 24, India’s foreign exchange reserves grew USD 5.97 billion to USD 578.77 billion,marking the second straight weekly rise. While DIIs were the net buyers over the past two weeks, FIIs have turned to being net sellers. The FII outflow was recorded at `4,410.49 crore whereas DII inflow was recorded at `14,386.37 crore in the past 15 days. 

As the government has removed the indexation tax benefit for investments in long-term debt mutual funds, banks expect more deposits in the near future.