Indian bank rally lifts Q2 market caps as economy rebounds

Eighteen of India's 20 largest banks saw increases in market capitalization in the second quarter, boosted by a stock rally amid the banking sector's strong recovery.

Nine banks reported double-digit percentage gains in market capitalization, led by IDFC First Bank Ltd. with a 44.53% climb to $6.41 billion. The lender rose to No. 11 from No. 14 in the ranking. IDBI Bank Ltd. climbed three spots to No. 8 after a 23% expansion to $7.25 billion, according to S&P Global Market Intelligence data.

Emkay Global Financial Services Ltd. analysts attributed the rebound to "its inherent resiliency amid bank failures somewhere else, healthy credit growth belying expectations of a slowdown and a stabilizing policy/interest rate environment," according to a July 10 research note. An expected strong earnings momentum in the June quarter should further support the current banking rally, benefiting Indian public sector banks and small-midcap banks more.

The benchmark BSE Sensex index climbed 9.7% in the second quarter, while Nifty Bank, a sectoral index focused on banking stocks, rose 10.2%.

Indian banks are likely to improve profitability, asset quality and capitalization as India's solid economic recovery from the pandemic continues. The Reserve Bank of India expects the economy to grow 6.5% in fiscal 2022-23 following 7.0% expansion last fiscal, making India the fastest-growing major economy as the International Monetary Fund projects global growth to slow to 2.8% this year from 3.4% in 2022.

Large Indian banks retained their top slots in the second quarter. HDFC Bank Ltd. maintained the top spot with a market capitalization of $115.93 billion after its merger with Housing Development Finance Corp. Ltd. on July 1. ICICI Bank Ltd. and State Bank of India kept second and third place, respectively, while Kotak Mahindra Bank Ltd. and Axis Bank Ltd. ranked fourth and fifth.

IndusInd Bank Ltd. and Bank of Baroda Ltd. switched spots at No. 6 and No. 7, Market Intelligence data shows. Central Bank of India dropped to 20th even after a 20.54% market cap expansion. Indian Overseas Bank fell to 14th from 8th and Canara Bank dropped to 10th.

Central Bank of IndiaUCO Bank made the list at No. 17 after its market cap increased 12.76%. Just two lenders — Bank of India Ltd. and The Federal Bank Ltd. — posted market cap declines.