The first quarter of 2025 (April-June) brought notable growth in market capitalisation for Indian banks, fueled by easing interest rates and better liquidity conditions, which boosted investor confidence across the sector.
Data from S&P Global Market Intelligence reveals that 18 out of the top 20 Indian lenders, including the country’s three largest banks, recorded an increase in market value during this period.
Cap Growth of SBI, ICICI and HDFC
HDFC Bank Ltd., India’s largest bank by market capitalisation, saw its market cap rise by nearly 9.7% while Its private sector rival, ICICI Bank Ltd., also reported a 7.4% gain. The government-owned State Bank of India (SBI), the largest lender by assets, clocked a market cap increase of 6.3%.
The banking sector’s strong performance highlighted positive trends in the Indian equity markets. The Nifty 50 index climbed 8.5% during the quarter, while the Nifty Bank index—which tracks the most liquid and largest banking securities—ballooned 11.1%. The Reserve Bank of India (RBI) posted a slowdown in credit growth for commercial banks, with May’s year-over-year increase falling to 9.9% from 16.2% a year earlier. The central bank expects India’s GDP growth to hold steady at 6.5% for the fiscal year, similar to the previous year, and has cut benchmark interest rates by 100 basis points since February.
Investor sentiment was further boosted by expectations that tariff policies proposed by US President Donald Trump would cause less disruption to global supply chains than initially feared. However, some concerns still prevalent regarding slowing growth in credit and deposits, which could reduce bank profit margins amid the declining interest rate environment.
To support credit growth and inject liquidity, RBI has brought several measures, including reducing the cash reserve ratio (CRR) that banks must maintain. In response, banks have lowered deposit interest rates, and a recent Nomura report suggested that stress on unsecured retail loans might be nearing its peak.
Among the standout performers in Q1, AU Small Finance Bank delivered an impressive 53% surge in market capitalisation, while IndusInd Bank rebounded strongly with a 34% increase after earlier setbacks related to accounting issues. On the downside, Kotak Mahindra Bank saw a minor decline of 0.35%, and state-owned UCO Bank suffered the largest loss, with its market cap dropping by over 9%.
(With ANI Inputs)
