Nifty Bank soars to new high on strong Q4 scores
domestic lenders
to record levels as better-than-expected March quarter results at top banks buttressed their investment case, already in focus of late on account of the preference for sectors benefiting from local prospects amid lingering uncertainty over trade tariffs. Expectations of more interest
rate cuts
, with the
Reserve Bank of India
signalling its intent to ease liquidity conditions, are also fuelling investor appetite for banks of late.
The NSE's
Nifty Bank
index surged 1.9% on Monday, boosting the gauge to record highs, scaling the highs last made on September 26. The broader NSE Nifty surged 1.15% to 24,125.55 points while the BSE Sensex was up 1.09% to 79,408.50 points.
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AU Small Finance Bank
was the top gainer on the Nifty Bank Index, up 7.3%, followed by
IDFC First Bank
and
IndusInd Bank
, which gained 5.8% and 4%, respectively. Investor appetite for banks got a boost after the fourth-quarter results of
HDFC Bank
and
ICICI Bank
over the weekend beat estimates. HDFC rose 1% and ICICI was up 0.1%.
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Agencies
'Rally Driven by Rate Cuts'
"Banks did well on Monday, because of strong results from large private banks and the absence of negative surprises in terms of asset quality," said Ramesh Mantri, chief investment officer at WhiteOak Capital AMC. Private lenders are back on investors' radar as part of a broader shift in their interest in domestic economy-facing sectors, which are perceived to be relatively insulated from the effects of US President Donald Trump's tariffs on the global economy.
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"While slower economic growth continues to be a concern, the banking sector is in a better position compared to many others during global uncertainty, since it mainly serves the domestic market," said Mantri.
Since April 7, when the market recovery started, the
Bank Nifty index
has gained nearly 11% as against the 9% upmove in the Nifty. The bounce in bank shares was instrumental in lifting the key indices because the weight of shares of lenders on these benchmarks is the highest at nearly 30%. So far in 2025, the Nifty Bank index has moved up 8.7%, against the Nifty's gains of 2%. "The recent rally in banking stocks can be largely attributed to the ongoing interest rate cut cycle, which has been beneficial for the sector," said Vikas Khemani, founder, Carnelian Asset Management and Advisors. "Rate cuts also tend to support credit growth within the broader economy, and we believe this move positions banks favourably for the next 12-18 months."
The RBI has cut the key policy rate by a total 50 basis points this year. This is expected to ease pressure on banks' margins.
Banks and non-banking finance companies (NBFCs) - mostly mid and small-sized - had been beaten down in the sell-off since late September on account of rising bad loans in the microfinance segment and other asset quality concerns. The RBI had flagged asset quality concerns for unsecured loans in December last year. Much of this has eased for now.
"Most asset quality concerns in the banking sector have been addressed, and we believe the next two to three years will see a phase of leveraging that should support growth for banks," said Anil Rego, founder and fund manager at Right Horizons Portfolio Management Services.
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