NSE’s Bank Nifty index hit a fresh 52-week high on Thursday, with five of its constituents including the country’s largest bank and the largest private sector bank to hitting the year-high. Banking stocks in India are on the up move on the back of the government’s continued statements about resolving the problem of stressed loans and helped by strong fundamentals.
Three other banks on the index had hit a year-high yesterday, with the Bank Nifty index hitting an all-time high. State Bank of India, the country’s largest bank by assets, touched Rs 293.75 before closing up 1.02% at Rs 291.05, while the country’s most valuable lender HDFC Bank hit Rs 1,479.95 and closed up 2.2% at Rs 1,466.20.
State-run Bank of India touched a one-year high of Rs 141.4 and closed up 0.3% at Rs 138.5. Private sector lender Yes Bank hit a year-high of Rs 1,557.5 before closing up 0.7% at Rs 1,552.15, while Federal Bank hit an all-time of Rs 91.85, but paired gains to end down 0.6% at Rs 90.75.
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The rise in the stocks led the Bank Nifty index to climb to its fresh year high of 21,696 points.
Earlier last week, Finance Minister Arun Jaitley spoke about taking recursive and prudent financial measures to solve the problem of stressed assets in order to smoothen the credit cycle of all the major state-run banks. Recently, the talk of creating a ‘bad bank’ has gained momentum to buy bad debts from lenders to restructure them, as it has now become imperative to tackle record stressed loans of $133 billion held by Indian banks by last September, or about 12.34% of their total loans.
Meanwhile, the private lenders are gaining on their own fundamental factors including healthy loan books and low NPAs (non-performing assets). Yes, Bank and IndusInd Bank have the lowest relative gross NPAs as compared to all the other banking companies in the Bank Nifty. Yesterday, private lender IndusInd Bank also made one-year high.
In the previous calendar year 2016, Bank Nifty witnessed mixed movement due to rising NPAs on the books of all banks. In the Union Budget 2016-2017, Finance Minister Jaitley announced relief schemes for improving the health of the lenders by tackling stressed assets and allocated Rs 10,000 crores for capital Infusion in PSU banks to meet their capital requirements and facilitate credit growth.