by Syed Fasiuddin
Bank Nifty constituents hit new highs shortly after Finance Minister Nirmala Sitharaman announced her budget for 2021. The Bank Nifty, since the announcement of the budget, which included numerous reforms aimed towards the BFSI sector, including the setting up of a bad bank, amendments towards the Insurance Act of 1938, the recapitalisation of public sector lenders, and the proposed divestment of two public lenders and one general insurer, amongst others, sparked cheer in the market – recording a 3074 point jump.
Public Bank stocks jump
Government owned lenders and constituents of the Bank Nifty Index – including the State Bank of India, Punjab National Bank (PNB), Bank of Baroda, recorded sharp single and double digit rises in values since February 1, when the budget was first announced. SBI within the day recorded a spectacular jump of 7.21%, closing at Rs 333.10 – rising by Rs 22.40. PNB and BoB recorded jumps of 1.26% and 1.01%, respectively, on February 2. PNB at the end of day traded at Rs 36.20, whilst BoB traded at Rs 74.65 – rising by 0.45 and 0.75 points, respectively.
Private lender stocks cheer
Private lenders RBL Bank, Federal Bank, HDFC Bank and Bandhan Bank recorded the highest jumps since the budget was first announced, rising by 11.52%, 10.08%, 9.9% and 9.84% respectively. RBL Bank recorded a jump of 25 points, closing at RS 242.00 at the end of market hours. HDFC Bank alone rose by 140.9 points, trading at Rs 1560, since the budget was announced, whereas Bandhan Bank rose by 30.40 points, to close at Rs 339.35, on February 2. Kerala based Federal Bank also recorded a 7.35 point jump to trade at Rs 80.25 by the close of the BSE.
Other constituents of the Bank Nifty, including ICICI Bank, Kotak Mahindra Bank and Axis Bank, recorded similar gains, jumping by 9.61%, 8.47% and 8.13%, respectively. ICICI Bank rose by 54.20 points to close at Rs 618.45, whereas Kotak Mahindra Bank and Axis Bank recorded an increase of 145.50 points and 53.65 points, respectively, to close at Rs 1863.50 and Rs 713.70.
Bankers remain optimistic
Both public and private bankers expressed optimism at the budget unveiled by Nirmala Sitharaman, on February 1. Dinesh Kumar Khara, Chairman of the State Bank of India (SBI), said “The Union Budget has unveiled a set of well-crafted and robust policies that encompasses the vision of an Atmanirbhar Bharat. The Budget has rightly envisaged a substantial jump in capital expenditure that has a strong multiplier impact on the economy. The decision to open up the insurance sector, setting up a DFI and an ARC, privatizing a couple of public sector banks are all positive steps for the financial sector.”
The Chairman of India’s largest lender further said “One of the cornerstones of this budget is fiscal numbers that are transparent and has the potential to surprise us on the upside. In principle, the budget has rationalized the off-balance-sheet borrowings and headline fiscal deficit numbers, which will overtly please markets and even rating agencies. The fact that the expenditure announcements in the budget have been matched with the status quo on taxes will please everyone and bolster market sentiments.”
Kotak Mahindra Bank founder Uday Kotak, expressing his views on the budget, tweeted “A Budget for growth with next-gen reforms. Focus on healthcare, infra, financial sector. A stable tax regime, higher borrowings for capex. Specific reforms: disinvestment & monetization, opening up of insurance, cleanup plan for stressed assets. Sign of a self confident India.”
Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank, noted “The government has prioritised spending on growth at this stage, in the hope that such growth would help manage the fiscal deficit subsequently. A substantial increase announced in the expenditure on healthcare and infrastructure will help boost economic growth, including the MSME sector and generate employment. Overall, it was a growth-centric Budget aimed at securing India’s long-term economic interest.